ST GOBAIN - COUVERTURE-GB 14/05/04 9:36 Page 1

ANNUAL REPORT Designed and produced by: produced Designed and credits: Photo – library, photo Saint-Gobain Deluze, Rémy X 2003 ANNUAL REPORT REPORT ANNUAL 2003 2003 -GOBAIN T IN SA

Les Miroirs F-92096 La Défense Cedex www.saint-gobain.com ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:13 Page ii

Stock Exchange Information, Shareholders and Corporate Governance

P.11 Enriched by a long history beginning in France in 1665 with the formation of Manufacture Royale des Glaces de Miroirs, Saint-Gobain has developed and diversified over the years, while being consistently at the forefront of successive technological revolutions. The Group's present configuration Glass is the fruit of a sweeping transformation and strategic reworking of its business operations and structures P. 48 that started in the 1990s.

These fundamental changes are being carried out in tandem with continued concentration on the Group's historic businesses High- of Flat Glass, Containers, Insulation, Pipe, and Building Performance Materials. In each of these businesses, Materials Saint-Gobain enjoys various strengths that translate into a solid base for profitable growth powered by constant P.55 renewal of technological expertise, worldwide or European leadership, strong free cash flow, and substantial growth potential in key emerging markets.

The Group's new businesses (Building Materials Distribution, Housing Ceramics & Plastics, Abrasives, and Reinforcements) Products have provided additional strengths, such as higher average organic growth, less of a capital intensive focus, and a host P.59 of opportunities for external expansion in markets that are still highly fragmented. These businesses have played a large part in transforming Saint-Gobain. They now account for 53% of Group sales compared with 25% in 1996 and represent some 75% of the Group's acquisition spending Research over the past seven years.

P.66

Saint-Gobain in figures

€29,590 Substainable million in sales Development €1,039 million in net income 172,811 P.68 employees A manufacturing or retail presence in 46 countries ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:13 Page 1

Chairman’s Statement

Operating objectives met once Our improved financial position will allow again and a strengthened us to step up the pace of expansion financial position More than ever, our growth hinges upon our capacity to accelerate development in emerg- Saint-Gobain delivered a resilient perform- ing countries. This not only enables us to ance in 2003 despite the sluggish global econ- lower our production costs, but also to take omy.Consolidated sales climbed by 2.5% on a advantage of the robust growth prospects comparable basis. This rate, which was sig- in these countries. Between 1997 and 2003, nificantly higher than global economic growth, Saint-Gobain achieved a fivefold increase in was fueled by a fifth consecutive year of across- sales in emerging economies at constant the-board increases in sales prices. Growth exchange rates. Each year, the Group devotes was further underpinned by strong momen- almost one-fifth of its capital expenditure tum in the Housing Products Sector and in to emerging regions of the world. emerging countries. To sustain its growth trajectory, the Group Thanks to this expansion, and despite increas- is leveraging high-potential acquisition es in raw materials costs, the Group posted opportunities. Alongside Building Materials a further 1% growth in operating income at Distribution and High-Performance constant exchange rates, which was in line Materials, our acquisition strategy will also with the objective set at the start of the year. focus on opportunities in emerging markets, The Group’s business model continues to particularly for the historic businesses. prove its worth. Its resilience is assured by a Another key driver of growth is the balanced spread of historic and new busi- dynamism and expansion of the Building nesses (Ceramics and Composites and Materials Distribution Division. As the lead- Building Materials Distribution), market sec- ing distributor of building materials in tors (construction, industrial investment and Europe, serving a customer base of contrac- consumer spending) and geographic regions. tors and tradesmen, the Division now oper- Thanks to its strategy, the Group has been ates almost 3,000 outlets. It is being bolstered able to improve its resistance to business by the development of specialized trading cycles and has proved its capacity for growth banners as well as by the rapid roll-out of through a three-year downturn.We regular- new sales formats, such as La Plateforme du ly generate high levels of cash flow from oper- Bâtiment. ations, reporting some €2.5 billion in 2003. The combination of tightly controlled capital Backed by the trust of our shareholders and spending, sharply reduced working capital customers, and the commitment and dedi- requirements, and the disposal of non-strate- cation of our worldwide employees and exec- gic activities such as Terreal, resulted in a fur- utives, the Saint-Gobain Group ther reduction in net debt, which was cut to is well-placed to benefit fully from the oppor- €5.7 billion at the end of 2003, from tunities presented by an economic recovery €7 billion a year earlier. in 2004.

Jean-Louis Beffa Chairman and Chief Executive Officer

SAINT-GOBAIN • 2003 ANNUAL REPORT 1 ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:13 Page 2

Key figures 2003

▼ Sales by Sector and Division Sales by geographic region ▼

Other Pipe 37% Glass Building Flat Glass Materials 5% North 7.2% France 14% America 9% Insulation and 32.2% Reinforcements 18.6% 10%

13% Containers

38% Building 11% Materials 11% High 42% Distribution Performance Materials Other European countries Housing Products 52% Ceramics & Plastics and Abrasives

2 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:13 Page 3

2003 Annual Report

This “Document de Référence” was filed with the Autorité des Marchés Financiers on April 19, 2004 (N°D.04-0526), in accordance with Regulation 98-01. It may be used as a supporting document for a financial operation, but only along- side an information memorandum approved by the Autorité des Marchés Financiers.

This English-language version of this annual report is a free translation of the original French text. It is not a binding doc- ument. In the event of a conflict in interpretation, reference should be made to the French version which is the authen- tic text. The auditors' report applies to the French version of the Management Report and the financial statements.

Contents

I - SAINT-GOBAIN TODAY Group strategy 4 Saint-Gobain’s businesses 7 The Saint-Gobain share 11 Stock exchange information 11 Shareholders 14 Information policy 20 Corporate governance 21 Board of Directors 21 Group Management 31 Internal control procedures 36 Statutory Auditors 38

II - 2003 MANAGEMENT REPORT Satisfactory 2003 results in a challenging global economy 44 Glass 48 High-Performance Materials 55 Housing Products 59 Research: a key growth driver 66 Sustainable Development: a long-term commitment 68 Risk Management 99 Outlook for 2004 104

III - CONSOLIDATED FINANCIAL STATEMENTS 106

IV - PARENT COMPANY FINANCIAL STATEMENTS 146

V - INFORMATION ON SUBSIDIARIES 168

VI - PERSONS TAKING RESPONSIBILITY FOR THE “DOCUMENT DE RÉFÉRENCE” AND STATUTORY AUDITORS 182

VII - CHECKLIST 184

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I • Saint-Gobain today

The results of a long-term strategy

The origins of the Saint-Gobain Group go back to the base for profitable growth powered by constant renewal founding in France of the Manufacture Royale des Glaces of technological expertise, worldwide or European leader- de Miroirs (Royal Mirror Glass Works) in 1665. Over the ship, strong free cash flow, and substantial growth poten- course of its development and diversification in interven- tial in key emerging markets. ing years, the Group has consistently been at the forefront of successive technological revolutions. Saint-Gobain's The Group's new businesses (Building Materials present configuration is the fruit of a sweeping transfor- Distribution, Ceramics & Plastics, Abrasives, and mation of its business operations and structures which Reinforcements) have provided additional strengths, such began in the 1990s and went on to fundamentally reshape as higher average organic growth, less of a capital inten- the Group's strategic focus. sive focus, and a host of opportunities for external expan- Today, Saint-Gobain operates as a manufacturer and sion in markets that are still highly fragmented. These provider of high-technology materials and associated serv- businesses have played a large part in transforming Saint- ices. Its mission is to produce, process and distribute the Gobain. They now account for 53% of Group sales com- most advanced materials and to deliver sustained prof- pared with 25% in 1996 and represent some 75% of the itable growth by leveraging its strong leadership positions. Group's acquisition spending over the past seven years.

A retooled group Saint-Gobain has doubled its global revenue footprint over the last six years. External growth operations have played The first stage in Saint-Gobain’s reorganization was to dis- a significant role in this expansion. For example, in the pose of historic businesses in which the Group did not Building Materials Distribution Division, major acquisi- have any specific technological advantage or a market tions such as UK-based Jewson and Graham and leading position either in Europe or the world. The other Germany-based Raab Karcher have driven a 30% increase principal landmarks of the Group’s restructuring have in sales over the period 2000 to 2003.In High-Performance been: Plastics (Ceramics & Plastics) and glass reinforcement fab- • the acquisition of Norton (1990); rics (Reinforcements), the same figures are 50% and 20% • the acquisition of the Poliet Group (1996); respectively. •a refocusing of historic businesses on downstream activ- ities and services, alongside expansion into emerging At the same time, Saint-Gobain has pressed ahead with countries. international expansion. To build upon its already diversi- fied presence in Europe and Latin America, the Group has Together, these developments have opened up new avenues strengthened its presence in North America, Central for the Group's long-term growth.The acquisition of Norton Europe and more recently, Asia. marked a new departure by giving Saint-Gobain a foothold in businesses with a higher technological content. Similarly, This geographical expansion has involved all divisions and its purchase of Poliet heralded a new approach to marketing businesses:Flat Glass in Asia and Central Europe,Insulation and services. At the same time, Saint-Gobain began focus- in Eastern Europe, Reinforcements in Asia, Eastern Europe ing on moving its semi-finished goods businesses "down- and Latin America, Containers in North and South America, stream", i.e. closer to end customers, enabling the Group to Ceramics and Abrasives (all continents), Pipe in Europe and better serve their requirements. China, and Building Materials in South America. Building Materials Distribution, which was initially restricted to These fundamental changes are being carried out in tan- France, is now the leading European player in its field* and dem with continued concentration on the Group's historic has gained a strong foothold in Brazil. businesses of Flat Glass, Containers, Insulation, Pipe, and Building Materials. In each of these businesses, Saint- Gobain enjoys various strengths that translate into a solid * Source: Saint-Gobain.

4 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:14 Page 5

At constant exchange rates,consolidated sales have multi- growth and to the extent possible, it is anticipating cus- plied four-fold in emerging countries over the last five tomers’ needs by investing in cutting edge research and years. development.There are still opportunities to seize for con- Having retooled the Group’s structure and reach, Saint- solidation in these extremely fragmented markets pro- Gobain can confront the economic challenges that lie vided the locations of the Group’s manufacturing facilities ahead. are optimized. At the same time, in order to rapidly adapt to market slowdowns these sectors have pursued efforts A balanced growth strategy to reduce production costs, while relocating certain pro- duction capacity, particularly to countries where growth The Group has in recent years implemented a strategy to has remained strong,such as China.Against this backdrop, achieve sustainable profitable growth based on three the Group has been able to maintain its ambitious objec- objectives: developing genuine leadership in all of its busi- tives for these businesses: strong medium-term organic nesses, improving its medium-term growth potential, bol- growth in the region of 5% per year, combined with a sus- stering its technological and sales capabilities, sharply tained high level of return on capital employed thanks to reducing its exposure to cyclical changes and market fluc- their lower level of capital intensity. tuations, and increasing profitability and free cash flow. Thanks to its business model – which is based on these The business model for Building Materials Distribution is objectives – despite a challenging economic environment, fully focused on profitable growth, to be achieved through Saint-Gobain was able to achieve an increase in operating a combination of marketing and service innovations, bolt- income on a comparable exchange rate basis in 2003, in on acquisitions and extending geographic reach. line with the objectives set at the beginning of the year. Innovation efforts have led to new store concepts, such as La Plateforme, new supplier partnerships, an own brands This strategy also applies to the three pillars of the Group's policy, and specific solutions for entering markets in new operations: the Historic Businesses, High-Performance countries based on tailored local offerings. The geographic Materials and Building Materials Distribution. growth strategy includes opportunities for bolt-on acquisi- tions,which are not limited to France.There are possibilities In the Historic Businesses the Group is focusing on opti- available for Jewson in the United Kingdom, Raab Karcher mizing its manufacturing and marketing performance by in Germany as well as in emerging countries where concentrating its major new investment programs in demand for new formats is strong. The La Plateforme con- emerging countries, while at the same time modernizing cept is also contributing to the Group’s drive for interna- its existing manufacturing base in Western Europe and tional expansion and has already been rolled out to seven the United States. These businesses are also aiming to countries. Building Materials Distribution therefore pro- achieve full production capacity as well as sustained pro- vides sustained high growth potential, building on a sys- ductivity and technological improvements. The pursuit of tem which is less capitally intensive than the Group’s other these objectives will also require tight control of capital activities. In 2003, Building Materials Distribution posted expenditure and increased free cash flow, which is charac- strong growth in Europe’s challenging markets, thanks par- teristically high in these businesses. The worth of the ticularly to the high volume of acquisitions during the year Group’s policy has been borne out by the results achieved. which are expected to contribute additional annual sales of almost €1 billion.The largest major acquisition was that of Despite the market downturn suffered in High- PUM Plastiques – a specialist distributor of plastic products Performance Materials between 2001 and 2003, the sec- – which represented approximately one fifth of total sales tor’s strategic model is still effective as prices tend to resist acquired. well in these highly specialized businesses, even in the This strategy has brought with it a proper balance of risks most challenging of economic conditions. The Group’s and opportunities for all of the Group’s activities over positioning in these specialty markets is therefore key to recent years. Since 1994, the manufacturing companies

SAINT-GOBAIN • 2003 ANNUAL REPORT 5 ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:14 Page 6

Saint-Gobain today

have maintained operating margin levels of over 10% nificantly strengthen its balance sheet structure during while GDP in the OECD nations fluctuated significantly the year by stepping up the pace of debt reduction. Net during the period, with a substantial fall in 2001 and chal- debt fell from €7 billion at December 31, 2002 to €5.7 bil- lenging economic conditions in 2002 and 2003. Against lion at year-end 2003. this backdrop, the Group confirmed its capacity to gener- In 2003, as in 2001 and 2002, Saint-Gobain’s business ate strong organic growth, reporting a 2.5% like-for-like model once again proved its worth. Faced with economic increase (including 1.7% volume growth), which is higher conditions which are still difficult the Group will main- than the GDP performance. This organic growth enabled tain its strategy for 2004, particularly focusing on the Group to achieve a slight increase in earnings in 2003 organic growth. Going forward, the significant debt on a comparable exchange rate basis, despite the sharp reduction in 2003 will enable the Group to have more rise in raw materials costs which hit particularly hard in room for maneuver for financing purposes, allowing for the first half of the year. possible further external growth transactions in certain Thanks to sales and earnings growth, combined with tight areas and particularly for the new businesses and control over capital spending, the Group was able to sig- emerging countries.

▼ Ten-year consolidated financial highlights

(in euro millions) 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 Net sales 29,590 30,274 30,390 28,815 22,952 17,821 16,324 13,931 10,719 11,357 Gross margin 7,327 7,604 7,698 8,146 6,851 4,573 4,118 3,374 2,664 2,697 Operating income 2,442 2,582 2,681 2,693 2,314 1,776 1,593 1,434 1,187 1,112 Income before tax and before profit on sales of non-current assets 1,722 1,848 1,988 1,947 1,821 1,393 1,220 1,124 1,070 808 Net income before minority interests 1,065 1,074 1,174 1,642 1,389 1,182 970 767 716 724 Net income 1,039 1,040 1,134 1,517 1,226 1,097 858 659 642 553 Earnings 2.99 12.20, 13.30 17.80 14.05 12.15 9.62 7.61 7.69 6.81 per share (in €) 3.05* Net income excluding profit on sales of non-current assets 1,020 1,051 1,057 1,026 883 790 656 636 613 413 Earnings per share excluding profit on sales of 2.93 12.32 12.40 12.04 10.12 8.75 7.35 7.34 7.34 5.09 non-current assets (in €) 3.08* Cash flow from operations 2,471 2,673 2,733 2,643 2,360 1,912 1,693 1,628 1,404 1,237 Capital expenditure 1,351 1,431 1,430 1,722 1,712 1,288 1,353 1,169 852 576 Total investment outlay (1) 1,911 2,061 2,246 4,694 3,479 3,019 2,447 3,034 1,448 997 Net equity 11,310 11,542 12,348 11,724 11,151 9,924 9,959 9,082 7,017 6,422 Net debt 5,657 7,012 7,792 8,217 6,306 3,885 2,668 2,249 600 383 Non-current assets 17,237 18,840 19,678 19,530 16,909 14,033 13,139 12,103 8,463 7,661 Working capital 5,247 3,951 3,075 3,222 2,612 1,838 2,262 1,757 2,499 2,990

Employees (as of Dec. 31) 172,811 172,357 173,329 171,125 164,698 117,287 107,968 111,701 89,852 80,909

* After the four-for-one stock split carried out on June 27, 2002. (1) Capital expenditure on plant and equipment plus investments in securities, excluding Saint-Gobain shares bought back.

6 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:14 Page 7

Saint-Gobain’s businesses

As a result of the redeployment of operations, three core tion of Furon in 1999, the Sector has also captured the num- Sectors have gradually emerged, each of which includes ber one position in High-Performance Plastics. Operations several operating divisions. Saint-Gobain is a global or are evenly spread between Europe, America and Asia. They European leader in all three sectors. Each sector has built are highly innovation-oriented, are often in niche markets, up an array of fast-growth businesses and has the neces- and enjoy strong growth momentum. sary resources to grasp opportunities for development. The Housing Products Sector includes the Building The Glass Sector includes Flat Glass, Insulation and Materials, Building Materials Distribution and Pipe divi- Reinforcements, and Containers. By harnessing the exten- sions.The Pipe Division is the number one supplier world- sive synergies between these market-leading businesses, wide of ductile cast iron pipes used for water distribution. Saint-Gobain has become the number one glass manufac- The Building Materials Division is joint world leader for turer worldwide. This leading position is unrivalled as roofing products and indoor and outdoor wall facings, none of the Group’s competitors operate across the full and is the European leader for industrial mortars. The spectrum of the glassmaking market. The Sector draws Building Materials Distribution Division is number one in upon a powerful presence in Europe, North America and Europe in its field since the acquisition of Meyer Latin America, as well as new positions in Asia. The end- International in the United Kingdom and Raab Karcher in user markets for the Sector's products are construction Germany.With manufacturing operations in Europe, Latin and renovation, the automotive industry, industrial America, Asia and South Africa and significant sales vol- machinery and household appliance manufacturers, as umes in distant export markets, the Pipe Division also has well as packaging. It is developing into new segments considerable international reach. where Saint-Gobain's specific technology allows it to design innovative products with high added value, and is Saint-Gobain's structure has therefore been optimized to pursuing growth opportunities in emerging countries. enable a worldwide strategy to be rolled out across all businesses. Its development towards downstream activi- The High-Performance Materials Sector comprises two divi- ties, the most recent chapter in its refocusing, has brought sions:High-Performance Ceramics & Plastics, and Abrasives. the dual benefit of reduced exposure to cyclical down- The Sector is the world leader in Abrasives* and in thermal turns and closer knowledge of buying trends among end- and mechanical applications of Ceramics. Since the acquisi- user consumers.

▼ Review by Sector and by Division

Net sales (in euro millions) 2003 2002 2001 2000 Flat Glass 4,298 4,423 4,478 4,478 Insulation and Reinforcements 3,110 3,329 3,274 3,274 Containers 3,869 4,076 4,070 4,070 (Internal sales) (11) (10) (9) (9) Glass 11,266 11,818 11,813 11,813 Ceramics & Plastics and Abrasives 3,256 3,637 4,018 4,018 High-Performance Materials 3,256 3,637 4,018 4,018 Building Materials 2,824 3,074 3,184 3,184 Building Materials Distribution 11,305 10,953 10,521 10,061 Pipe 1,516 1,344 1,397 1,782 (Internal sales) (283) (269) (278) (203) Housing Products 15,362 15,102 14,824 14,824 (Internal sales) (294) (283) (265) (265) TOTAL 29,590 30,274 30,390 30,390

Pro forma accounts have been prepared for 2001, following the transfer, as from January 1, 2002, of the Pipe Division’s distribution operations to the Building Materials Distribution Division.

* Source: Saint-Gobain. SAINT-GOBAIN • 2003 ANNUAL REPORT 7 ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:14 Page 8

Saint-Gobain today

Glass

Flat Glass Businesses and products Key uses Key competitors Competitive ranking*

■ Basic Flat glass products ■ Clear and colored glass, ■ Pilkington (United Kingdom) layered glass ■ Asahi (Japan) ■ Guardian (United States) ■ PPG (United States)

■ Processing and distribution ■ Construction, building industry, ■ European leader Building industry interior design, furniture and No. 2 worldwide

■ Automotive glass ■ Clear and safety products for the automotive industry, glass for replacement parts Aeronautics and mass transit

■ Specialty glass ■ Fireproof glass, nuclear safety, ■ Schott (Germany) industrial optics, home appliances, industrial refrigeration, glass for electronics Insulation and Reinforcements Businesses and products Key uses Key competitors Competitive ranking*

■ Glass wool ■ Thermic and acoustic ■ Owens Corning ■ Rock wool insulation of buildings, (United States, China) ■ Insulation: world leader ■ Soundproof ceilings technical facilities, ■ Johns-Manville (United States) ■ Insulating foam rolling materials ■ Rockwool (Europe) ■ Metal frames and ceilings Hydroponic cultivation ■ Uralita (Europe) ■ Knauf (United States, Europe) ■ Armstrong (United States, Europe)

■ Glass threads (TD,TPA,Tx, etc.) ■ Automotive, mass transit, ■ Owens Corning (United States) ■ Reinforcements: world leader construction, industrial and ■ PPG (United States) consumer machines, electrical ■ Johns-Manville (United States) and electronics industries ■ Nippon Electric Glass (Japan)

■ Processing (glass, carbon, ■ Building industry, industrial ■ Nitto-Boseki (Japan) ■ Leader in external insulation polyester and Kevlar® glass grids materials, technical composites grids for buildings and reinforcing fabrics) Containers Businesses and products Key uses Key competitors Competitive ranking*

■ Bottles and jars ■ Food packaging (for drinks and ■ Owens Illinois (United States, ■ Joint world leader miscellaneous food products) Europe, Latin America) ■ European leader ■ Vitro (Mexico) (all businesses combined) ■ Anchor Glass (United States) ■ BSN Glass Pack (Europe) ■ Rexam (Europe, United States)

■ Flasks ■ Fragrances, pharmaceutical ■ Pochet (France) ■ World leader and medical products ■ Rocco Bormioli (Italy) ■ Gerresheim (Germany, United States) ■ Wheaton (United States)

■ Plastic pumps ■ Cleaning products, health ■ Continental AFA (United States) ■ World leader/joint leader and dispensers and beauty care products ■ Crown Cork (Europe) (all businesses combined) ■ Fragrances and pharmaceuticals ■ Guala (Italy) ■ Aptar (Europe, United States) ■ Rexam (Europe) ■ Coster (Italy)

* Source: Saint-Gobain.

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High-Performance Materials

Ceramics & Plastics Businesses and products Key uses Key competitors Competitive ranking*

■ Industrial Ceramics ■ Refractories for glassmaking, ■ Cookson (United Kingdom) ■ World leader for thermal ceramics, metallurgy ■ Morgan Crucible and mechanical applications and power generation furnaces (United Kingdom) Ceramic pellets and powders ■ Washington Mills (United States) for industrial abrasives, ■ RHI (Austria) refractories, ceramics and other industrial applications. Catalysts used in the petrochemicals industry

■ Specialty ceramics ■ Equipment and components ■ Kyocera (Japan) ■ No. 2 worldwide (including crystals) for semiconductor ■ Toshiba Ceramics (Japan) in specialty ceramics manufacturing. ■ Asahi (Japan) Fine and structural ceramics for ■ Coorstek (United States) applications in home appliances, ■ Ceramtech (Germany) automotive, aeronautics and ■ NGK (Japan) aerospace components, telecommunications, nuclear power, oil and petrochemicals

■ High-Performance ■ Fluid systems ■ Entegris (United States) ■ No. 1 or No. 2 worldwide Plastics Plummer blocks and seals ■ Trelleborg (Sweden) in all High-Performance Technical films and fabrics ■ DuPont (United States) Plastics business lines Specialty elastomers ■ 3M (United States) Abrasives Businesses and products Key uses Key competitors Competitive ranking*

■ Grinding wheels ■ Roughing, precision grinding, ■ Milacron (United States) ■ World leader sharpening of tools and materials ■ Carbo plc (United Kingdom) for all business lines for the aeronautics, automotive, ■ Noritake (Japan) metals processing, mechanical ■ Tyrolit ( Austria) bearings and iron and steel industries

■ Thin grinding wheels ■ Cutting and trimming, metals ■ SAIT (Italy, United States) processing, maintenance, energy, ■ Tyrolit (Austria) iron and steel, construction ■ Comet (Slovenia) and home improvement

■ Coated abrasives ■ Surface treatments, sanding: ■ 3 M (United States) aeronautics, automotive, ■ Hermes (Germany) furniture, portable machines, ■ Klingspor (Germany) steel, jewelry, watchmaking, ■ SIA (Switzerland) biomedical industries

■ Superabrasives ■ Precision work for the ■ Asahi (Japan) aeronautics, automotive, ■ Diamant Boart (Belgium) cutting tools, mechanical ■ Noritake (Japan) bearings, electronics and ■ Wendt Boart ( Belgium) composite materials industries. Glass products Construction materials and stone cutting tools

* Source: Saint-Gobain.

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Saint-Gobain today

Housing Products Building Materials Distribution Businesses and products Key uses Key competitors Competitive ranking*

■ Distribution of building ■ Market for houses ■ Wolseley ■ European leader in building materials for new construction and apartments (United Kingdom/France) materials distribution and and renovation Home equipment: kitchens, ■ CRH (Ireland, Netherlands) world leader in ceramic tile ■ Industrial carpentry carpentry, bathrooms, heating ■ Travis Perkins (United Kingdom) distribution Building Materials Businesses and products Key uses Key competitors Competitive ranking*

■ PVC indoor and outdoor ■ New construction and ■ Materis (France) ■ European leader sidings (United States) renovation of existing homes ■ Owens Corning (United States) for industrial mortars ■ Roofing products (United States) Wall coatings, glues and joints ■ Trex (United States) ■ Among the world leaders ■ Concrete products for tiling ■ GAF (United States) in wall facings and coatings ■ Composite materials, mortars Road-building and utilities ■ Elk (United States) ■ Joint world leader Civil engineering ■ James Hardie (Australia) for roofing products Urban furniture ■ Etex (Belgium) Materials for gardens ■ Wienerberger (Austria) and landscaping ■ Royal Group (Canada) ■ Bonna-Sabla (France) Pipe Businesses and products Key uses Key competitors Competitive ranking*

■ Entire systems of ductile ■ Drinking water supply ■ US Pipe (United States) ■ World leader cast iron pipes and accessories Irrigation ■ Mac Wane (United States) in ductile cast-iron pipes for multi-material pipe systems Wastewater networks ■ Kubota (Japan) Fire protection ■ Xinxing (China) Rainwater drainage ■ Buderus (Germany) ■ Tyco (United States)

■ Ductile cast iron and ■ Access to wet ■ Norinco (France) ■ World leader steel roadwork components and dry networks in ductile cast iron roadwork components

■ Entire pipe systems ■ Pipes for buildings ■ European leader for wastewater and rainwater in cast iron components drainage for the construction for the construction industry industry

* Source: Saint-Gobain.

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The Saint-Gobain share

The Saint-Gobain share forms part of the support shares on Stock Exchange Information the traded options market of the Paris Stock Exchange (MONEP) and of the London Stock Exchange.The number of At December 31, 2003, Saint-Gobain ranked twenty-first in option transactions on the Paris Stock Exchange in Saint- France as regards market capitalization (€13,495 million) Gobain shares was 3,471,495 lots in 2003, against 2,576,045 and eighteenth as regards the volume of shares traded on in 2002. the Premier Marché of Euronext Paris SA (ISIN code:FR 0000 125007), with an average of 2,145,475 shares traded daily in Highest and lowest share prices 2003. Saint-Gobain stock is also traded on the principal (source: Euronext Paris SA) European stock exchanges of Frankfurt, London, Zurich Year High Low Year-end (since 1987), Amsterdam, and Brussels (since 1988).The aver- (in euros) price 189.90 103.10 186.70 age transaction volume on these foreign markets was also 1999 195.70 116.50 167.30 large, notably on the London Stock Exchange. The Saint- 2000 Gobain share is also included in the Dow Jones "Sustainable 2001 180.00 128.20 169.50 Development" indexes (DJS World Index and DJS European 2002* 49.05 18.57 27.96 Index) and in the DJ Euro Stoxx 50 index of 50 leading 2003 39.10 22.40 38.81 European stocks. (*) After the four-for-one stock split of June 27, 2002.

Dividends

Year Number of shares Income per share Total income Yield based on which dividends paid in euros on closing Dividend + tax price for credit the year 2001 85,258,628 shares 4.50 2.25 6.75 3.98% 2002* 341,010,680 shares 1.13 0.565 1.695 6.06% 2003 347,824,967 shares 1.15 0.575 1.725 4.44%

(*) After the four-for-one stock split of June 27, 2002. Dividends which are not claimed within five years of the date of payment become statute-barred and are then paid to the State.

▼ Share Price Total Shareholder Return After the four-for-one stock split of June 27, 2002 • Since the Company’s privatization in December 1986: 60 € 11.5% per year, of which: 7.2% in share price gains 50 € Saint-Gobain 4.3% in gross dividends share price 40 € (including the 50% avoir fiscal tax credit)

30 € The calculation breaks down as follows: € 20 € • IPO price: FRF 310, or 11.81 per share (after the four-for-one stock split of June 27, 2002) Paris Stock Exchange 10 € average trend) • payment of dividends in cash in 1987 and 1988

0 • “reinvestment” of dividends in shares between 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1989 and 1997 • payment of dividends in cash between 1998 and 2003 • share price at December 31, 2003: €38.81

SAINT-GOBAIN • 2003 ANNUAL REPORT 11 ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:14 Page 12

Saint-Gobain today

• Over 10 years – from December 31,1993 to December 31,2003: Transactions since October 2002 10.3% per year, of which: (source: London Stock Exchange) 5.9% in share price gains London Stock Volume Value (in 4.4% in gross dividends (including the 50% avoir Exchange of shares £ thousands) fiscal tax credit) 2002 October 19,653,921 286,529 5,186,619 80,913 The calculation breaks down as follows: November December 2,634,878 47,797 • share price at December 31, 1993: FRF 576, or TOTAL 27,475,418 415,239 €21.96 (after the four-for-one stock split of June 2003 27, 2002) January 1,251,522 21,716 •“reinvestment” of dividends in shares between February 3,995,148 74,812 1994 and 1997 March 2,211,276 37,689 • payment of dividends in cash between 1998 April 2,453,039 49,932 and 2003 May 1,990,244 43,715 € • share price at December 31, 2003: 38.81 June 3,700,091 87,855 July 12,662,688 303,744 Number of shares traded August 9,895,310 246,003 ▼ after the four-for-one stock split (in thousands) September 11,291,452 269,719 20,000 October 13,283,555 317,368

15,000 November 9,975,818 252,256 11,775,611 312,028 10,000 December TOTAL84,485,754 2,016,837 5,000 2004 0 January 16,447,200 457,122 12/24/86 12/31/03 February 12,807,680 365,023 March 13,202,242 360,849 Transactions since October 2002 (source: Euronext Paris SA) A total of 225,800 shares were traded on the Frankfurt Stock Paris Stock Volume Value (in € High Low Exchange of shares thousands) (in €) (in €) Exchange in 2003 (source: Datastream). 2002 October 80,463,477 1,822,070 27.13 18.57 In 2001, the Group issued successful public tender offers November 56,958,538 1,491,420 31.18 20.60 for the minority interests in a Spanish subsidiary and December 34,672,358 990,520 32.20 26.11 three Brazilian subsidiaries and these four companies TOTAL 172,094,373 4,304,010 were delisted. In 2002, the Group issued a public buyback 2003 offer for the shares which it did not already own in January 46,259,716 1,250,287,844 30.00 24.02 Lapeyre, followed by a compulsory buyout. Further to February 46,353,884 1,290,644,974 29.90 25.60 these transactions, the only Group companies, other than March 51,029,911 1,326,886,711 28.51 22.40 Compagnie de Saint-Gobain, which are currently listed are April 46,885,398 1,358,141,538 32.38 24.35 Saint-Gobain Oberland, listed on the Frankfurt, Munich 48,611,896 1,518,054,946 32.65 30.01 May and Stuttgart stock exchanges, Hankuk Glass Industries, 77,139,163 2,583,227,235 36.01 30.66 June listed in Seoul, and Grindwell Norton and Saint-Gobain July 45,698,281 1,569,977,371 36.56 32.30 Sekurit India Ltd, listed in Mumbai. August 29,956,970 1,065,037,198 37.30 34.30 September 44,445,984 1,531,172,032 37.00 30.73 October 45,673,234 1,570,622,810 36.41 31.22 November 34,998,971 1,276,670,025 38.00 34.91 December 30,042,609 1,136,720,146 39.10 36.88 TOTAL 547,096,017 17,477,442,830 2004 January 33,912,190 1,348,062,400 42.00 38.15 February 30,532,612 1,283,670,018 43.68 40.16 March 39,932,504 1,629,243,034 44.09 38.31

12 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:14 Page 13

OCÉANES bonds (convertible into either new or Non-voting participating existing shares) securities

In February 2002, Compagnie de Saint-Gobain issued five- In June 1983, Compagnie de Saint-Gobain issued non-voting year "Océane" bonds that are convertible into either new participating securities for FRF 700 million with an attached or existing shares, for a total amount of €920 million. warrant giving the right to subscribe to an additional FRF 700 These securities have been listed on the Premier Marché of million of non-voting participating securities. In all, 1,288,299 Euronext Paris SA since February 18, 2002. securities of FRF 1,000 have been issued. Their par value now stands at €152.45 following the conversion into euros carried out in 1999. Since their issue the remuneration of the non-voting securi- Transactions since October 2002 ties has always reached the maximum permitted under the (source: Euronext Paris SA) terms of the prospectus,i.e. 125% of the average rate of interest Paris Stock Volume Value (in € High Low on bonds (TMO). Based on the 2002 results, the remuneration € € Exchange of shares thousands) (in ) (in ) in 2003 should be at the same level.The remuneration is set at 2002 between 75% and 125% of TMO, based on the consolidated 12,267 2,380,748 210.1 185.0 October results of the Saint-Gobain Group. The amount paid per secu- November 49,283 9,505,568 200.5 188.0 rity in 2003 in respect of the 2002 fiscal year was €9.80. December 3,431 684,114 204.9 198.6 TOTAL 64,981 12,570,430 2003 Transactions since October 2002 January 64,054 12,772,685 213.00 196.21 (source: Euronext Paris SA) February 34,298 6,966,413 206.00 203.00 € March 46,182 9,508,792 206.75 205.00 Paris Stock Volume Value (in High Low Exchange of shares thousands) (in €) (in €) April 9,852 2,065,342 212.20 202.00 2002 May 9,970 2,138,213 215.50 212.00 October 1,832 259,784 150.0 131.0 June 969 209,351 218.10 215.00 November 5,781 814,712 154.0 134.6 July 39,887 8,750,159 221.00 216.00 December 4,145 584,430 146.7 135.0 August 7,323 1,598,372 222.00 215.00 TOTAL 11,758 1,658,926 September 6,481 1,402,360 222.00 215.50 2003 October 16,013 3,479,788 218.50 215.00 January 851 122,415 155.00 140.10 November 25,109 5,517,943 221.00 216.80 February 1,286 179,626 151.90 132.00 December 6,123 1,355,911 224.50 220.50 March 1,957 283,526 149.00 140.00 TOTAL 266,261 55,765,327 April 2,015 294,008 149.00 143.00 2004 May 962 147,803 160.00 148.00 January 29,826 6,518,225 220.40 215.00 June 1,727 265,905 156.00 152.00 February 11,954 2,664,581 224.15 217.00 July 3,175 493,917 162.00 148.00 March 11,866 2,647,069 240.00 220.25 August 2,140 326,630 153.50 149.50 September 535 83,506 165.50 152.10 October 765 121,552 164.00 154.90 November 1,249 197,193 165.50 151.10 December 1,917 307,702 179.00 155.30 TOTAL 18,579 2,823,782 2004 January 3,084 514,385 170.00 162.00 February 3,196 539,313 169.80 167.00 March 8,906 1,594,780 192.90 168.80

SAINT-GOBAIN • 2003 ANNUAL REPORT 13 ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:14 Page 14

Saint-Gobain today

In April 1984, non-voting participating securities amount- Transactions since October 2002 (source: Euronext Paris SA) ing to ECU 100 million were issued together with a war- rant giving the right to acquire an equivalent number of Paris Stock Volume Value (in € High Low participating securities in ECUs. In all, 194,633 securities of Exchange of shares thousands) (in €) (in €) ECU 1,000 have been issued.Their par value is now €1,000. 2002 October 309 47,548 154.9 152.0 200 30,405 152.1 152.0 The remuneration of the non-voting participating securi- November December 340 51,393 152.7 151.0 ties in ECUs comprises a fixed portion of 7.5% per annum TOTAL 849 129,346 applied to 60% of the par value of the security and a vari- 2003 able amount on the remaining 40% based on the consoli- January 31 4,670 152.00 150.00 dated net income of the previous year within the limits set February 149 22,682 153.00 151.00 by the prospectus. The total remuneration varies, depend- March 75 11,545 154.00 153.52 ing on consolidated net income, between the average rate April 32 4,940 155.00 154.00 of interest on bonds (TMOE) less 0.50% and the TMOE plus May 279 42,971 155.00 153.50 € 1.75%. The amount paid by security in 2003 was 69.70, June 37 5,699 154.50 154.00 paid in two installments. July 340 52,474 158.00 149.20 August 000.00 0.00 September 117 17,784 153.00 150.00 October 50 7,785 156.80 155.00 November 228 35,592 158.36 155.00 December 324 50,001 158.00 152.00 TOTAL 1,662 256,142 2004 January 98 15,528 163.51 156.01 February 227 36,671 164.00 161.10 March 148 25,232 173.00 161.20

There are no other Compagnie de Saint-Gobain securities traded on a market other than shares, "OCÉANE" bonds and non-voting participating securities.

14 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:14 Page 15

Shareholders

Capital stock compared to 341,010,680 shares at December 31, 2002. The increase in the number of shares reflects the issue of At December 31, 2003, the capital stock of Compagnie de 6,499,407 shares subscribed by employees under the Saint-Gobain amounted to €1,391,299,868 breaking down Group Savings Plan and the issue of 314,880 shares follow- into 347,824,967 ordinary shares (after the four-for-one ing the exercise of the same number of stock options. stock split of June 27, 2002) with a par value of €4 each,

Ownership structure

December 31, 2003 December 31, 2002 March 1, 2002 % interest Voting rights % interest Voting rights % interest Voting rights Group Savings Plan 7.4% 11.7% 6.3 % 9.6 % 6.5 % 9.4 % Caisse des Dépôts et Consignations 4.2% 4% 4.6 % 4.4 % 4.6% 4.3 % BNP Paribas Group 0.6% 1.2% 1.0 % 1.8 % 2.1 % 4.0 % AXA Group 1.1% 1.2% 2.4 % 3.8 % 1.9 % 3.3 % Treasury stock 3.3% 0 1.5 % 0 1.4 % 0 Other shareholders 83.4% 81.9% 84.2 % 80.4 % 83.5 % 79.0 % TOTAL 100% 100 % 100 % 100 % 100 % 100 %

The breakdown of ownership and voting rights has changed Since 1987, the Company’s bylaws have provided that fully considerably in recent years. As a result of the policy of paid up shares registered for two years in the name of the unwinding cross-shareholdings, Suez and Saint-Gobain have same shareholder carry double voting rights. In addition, not had any capital ties since 1998 and Vivendi Universal has when the capital is increased by the capitalization of reserves, not held a stake in Saint-Gobain since May 2002. Institutional profits or issue premiums, a right to a double vote is granted investors such as Caisse des Dépôts et Consignations have on issue to each bonus share distributed free of charge to a gradually taken over the role previously occupied by these two shareholder owning shares giving rise to this right. Any share historic shareholders. Lastly, the Group Savings Plan has con- converted into bearer form or whose ownership is transferred siderably increased both its ownership interest and its voting loses the right to a double vote. Nevertheless, transfers result- rights over the last few years and has been the Company's ing from an inheritance or from the liquidation of the joint leading shareholder since 2000. estate of a husband and wife or donations inter vivos in respect of a husband, wife or parent entitled to share in the During 2003, Caisse des Dépôts et Consignations informed estate of an intestate,do not result in the loss of the right and the Company that it had (i) crossed the disclosure threshold of do not interrupt the two-year period referred to above. 5% of the Company’s capital by increasing its interest, (ii) crossed the disclosure threshold of 5% of the Company’s vot- At December 31, 2003 the number of voting rights was ing rights by increasing its voting rights and finally (iii) crossed 357,368,824 for 347,824,967 shares. Given the 4,073,400 out- these two thresholds by reducing its interest (Notification standing stock options at that date, the potential capital numbers 203CO864, 950 and 990 dated June 10, and June 25, would be made up of 351,898,367 shares assuming all rights and July 2,2003 issued by the Conseil des Marchés Financiers). were to be exercised and not taking into account any conver- To the best of the Company's knowledge, there are no pacts sion into new shares of the Océane bonds in issue. If all of concerning the capital stock and the major shareholders those bonds were to be converted, the Company's capital mentioned above do not act in concert. would be made up of 369,422,179 shares. Saint-Gobain does not hold any of its own shares other than The percentage of the share capital held personally by mem- those held in treasury stock mentioned above. bers of the Board of Directors is below 0.5%.The same applies According to the December 31, 2003 identification of holders to Group Management. of bearer shares, the number of shareholders is estimated to be around 230,000.

SAINT-GOBAIN • 2003 ANNUAL REPORT 15 ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:15 Page 16

Saint-Gobain today

Changes in capital in the last five years

Capital Number of shares

1-99 €1,376,550,410 90,295,788 Conversion into euros of capital stock 6-99 €1,307,722,916 85,781,000 Cancellation of 4,514,788 shares 6-99 €1,372,496,000 85,781,000 Increase in the par value to €16 6-99 €1,391,283,744 86,955,234 Group Savings Plan: issue of 1,174,234 shares (at €97) 12-99 €1,395,788,000 87,236,750 Subscription to 281,516 shares by the exercise of as many stock options 6-00 €1,342,036,944 83,877,309 Cancellation of 3,359,441 shares 9-00 €1,373,336,528 85,833,533 Group Savings Plan: issue of 1,956,224 shares (at €106) 11-00 €1,361,990,544 85,124,409 Cancellation of 709,124 shares 12-00 €1,363,412,208 85,213,263 Subscription to 88,854 shares by the exercise of as many stock options 6-01 € 1,377,862,608 86,116,413 Group Savings Plan: issue of 903,150 shares (at €133) 11-01 €1,362,189,600 85,136,850 Cancellation of 979,563 shares 12-01 €1,364,138,048 85,258,628 Subscription to 121,778 shares by the exercise of as many stock options 6-02 €1,382,951,632 86,434,477 Group Savings Plan: issue of 1,175,849 shares (at €135.50) 6-02 €1,383,404,272 86,462,767 Subscription to 28,290 shares by the exercise of as many stock options 6-02 €1,383,404,272 345,851,068 Four-for-one stock split (par value of shares reduced from €16 to €4 ) 11-02 €1,363,589,440 340,897,360 Cancellation of 4,953,708 shares 11-02 €1,364,000,000 341,000,000 Subscription to 102,640 shares by the exercise of as many stock options 12-02 €1,364,042,720 341,010,680 Subscription to 10,680 shares by the exercise of as many stock options 7-03 €1,390,164,428 347,541,107 Group Savings Plan: issue of 6,499,407 shares (at €21.14) and subscription to 31,020 shares by the exercise of as many stock options 12-03 €1,391,299,868 347,824,967 Subscription to 283,860 shares by the exercise of as many stock options

Financial authorizations

Following resolutions adopted by the Company’s share- the capitalization of additional paid-in capital, reserves, holders at the Ordinary and Extraordinary General Meeting income or other capitalizable items,by a maximum of €760 of June 5, 2003, the Board of Directors has been granted the million (par value of shares) or €3 billion (debt securities). following financial authorizations: –increase the Company’s capital stock, through the issue – ■ an authorization until December 2004 to buy back and without pre-emptive subscription rights for existing possibly resell a maximum of 33,550,000 shares with a shareholders – of shares or share equivalents, including if maximum purchase price of €40 each and a minimum applicable securities to be issued by subsidiaries, by a sale price of €16 each. maximum of €760 million (par value of shares) or €3 bil- ■ Until June 2005, authorization to: lion (debt securities). – cancel all or some of the Saint-Gobain shares bought The €760 million ceilings on the par value of shares men- back by the Company provided that the total number of tioned in these authorizations may not be aggregated. shares cancelled within any twenty-four month period – carry out employee share issues for members of the does not exceed 10% of the Company’s capital, and to Group Savings Plan, representing a maximum aggregate reduce the capital accordingly. par value of €64 million. The shares issued under this ■ Until August 2005, authorization to: authorization may not be offered at a discount of over – issue debt securities with a maximum face value of € 3 20% of the average of the opening share prices quoted billion. over the twenty trading days preceding the date of the –increase the Company’s capital stock, either through the decision made by the Board of Directors. issue – with pre-emptive subscription rights for existing –grant stock purchase or subscription options to the shareholders – of shares or share equivalents, or through employees or officers of Saint-Gobain. The purchase or

16 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:15 Page 17

subscription price of the shares must be at least equal to shares (see prospectus dated February 5, 2004 approved 100% of the average of the opening prices quoted for the by the AMF under visa no. 04-0082). Company’s shares over the twenty trading days preceding the date of grant. The total number of stock options granted may not entitle beneficiaries to purchase or sub- Saint-Gobain stock option plans scribe to a number of shares representing over 3% of Compagnie de Saint-Gobain’s capital stock at the date of Stock option plans have been approved by the Board of the Shareholders’ Meeting. Directors every year since 1987; the plans for the years from 1987 to 1994 inclusive are now terminated, as the maximum term to exercise these options had been set Issue of OCÉANE bonds at five years up to 1991, eight years up to 1998 and then ten years subsequently. In February 2002, Compagnie de Saint-Gobain issued “Océane bonds” that are convertible into either new or Saint-Gobain stock option plans are decided by the existing shares, for a total amount of €920 million, at an Board of Directors following a review of proposals pre- annual interest rate of 2.625%. These bonds, maturing on sented by the Appointments Committee. In 2003, this January 1, 2007, have a nominal value of €52.50 each (tak- committee was chaired by Bernard Esambert and subse- ing into account the stock split). They have been listed on quently Gérard Mestrallet and the other members were the Premier Marché of Euronext Paris SA since February 18, Daniel Bernard and Bruno Roger. 2002 (see page 13) and carry an early repayment option that can be exercised by the issuer as from February 18, In addition to Group Management (9 persons), the 2005 if the Saint-Gobain share price exceeds 31.25% of the options granted in November 2003 concerned three cat- bond issue price, taking into account the stock-split. If all of egories of recipients: the bonds were to be converted, this would give rise to the ■ Category A includes the Presidents of the Divisions, the issue of 17,523,812 new Saint-Gobain shares. At December General Delegates, and Functional Directors who are 31, 2003 no conversion requests had been received. part of the Group Coordination Committee (17 persons); ■ Category B includes the main operational and func- tional managers of the Divisions and General Group Savings Plan Delegations (888 persons); ■ Category C includes high-potential executives as well The Group Savings Plan (PEG) is a key feature of the social as managers or employees who have achieved superior contract within the Group. It represents an excellent performance (479 persons). means of including employees in the Company's success- es and resulting profits. The total number of beneficiaries of the November 2003 plan was 1,393, on a par with 2002 when they numbered In 2003, the Group Savings Plan offered employees the 1,368. In each of the above categories, the number of standard options of five- and ten-year terms as well as an options granted is individually tailored according to option with a five-year term leverage effect. 6,499,407 responsibilities handled and performance achieved. The were subscribed by the PEG in 2003, for a total of €137.4 total number of options granted in 2003 was 3,717,700 million (2002: 4,703,396 shares for €159 million). (compared with 3,785,500 in 2002), which represented 1.1% of capital stock at December 31, 2003. In France, over 60% of employees have subscribed to the PEG through company mutual funds. The PEG has been Until 1996 and in 2003, these plans involved subscrip- extended to employees in twenty other European coun- tion options on new shares. Between 1997 and 2002 they tries and seven countries on other continents. In all, about involved purchase options on existing shares held in 37,000 Group employees have participated in the PEG. treasury stock for this purpose.

At December 31, 2003, the Group Savings Plan held 7.4% of All discounts on the average share price for the period the Company’s capital stock and 11.7% of its voting rights. immediately preceding the date of grant of the options A new plan was launched in January 2004 offering were discontinued in 1999; the exercise price was there- employees the standard options of five- and ten-year fore set at 100% of this average price, i.e. €35.67 for the terms, with a ceiling of six million five hundred thousand November 2003 plan.

SAINT-GOBAIN • 2003 ANNUAL REPORT 17 ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:15 Page 18

Saint-Gobain today

The main general conditions set by the Board for the exer- share price outperforming the exercise price by more cise of these options are the following: than 20% at the end of the minimum vesting period. ■ options must be exercised within ten years of the date Further, in accordance with an internal rule instituted by the of grant ; Board of Directors in 1997,Group Management and Category ■ the minimum period before the options vest is either A persons who are members of the Group Coordination three or four years; Committee and benefit from stock options were required at ■ all rights to options are forfeited if the employee ter- the end of 2003, if they had more than five years’seniority in minates employment with the Group, unless expressly their current function, to own at least 3,200 registered Saint- agreed otherwise by the Chairman of the Board and the Gobain shares and to increase their holdings by at least 400 Appointments Committee. shares per annum; Category B beneficiaries are required to own at least 400 registered shares at all times. Specific exercise conditions are attached to some cate- gories of beneficiaries. For instance, as in 2002, the Board The following three tables summarize key data on unex- of Directors has made the vesting of half of the options pired stock option plans at December 31, 2003, with the granted to Group Management and Category A recipients latter two dealing with the stock options of corporate in November 2003 conditional upon the Saint-Gobain officers and of the ten largest recipients.

Date of Shareholders’ Meeting authorizing 6/13/1995 6/13/1995 6/25/1997 6/25/1998 6/24/1999 6/24/1999 6/28/2001 6/28/2001 6/5/2003 the plan Date of Board of Directors’ Meeting 11/16/1995 11/21/1996 11/20/1997 11/19/1998 11/18/1999 11/16/2000 (***) 11/22/2001 11/21/2002 11/20/2003 Type of options Subscription Subscription Purchase Purchase Purchase Purchase Purchase Purchase Subscription Number of beneficiaries 121 161 182 218 393 780 1,351 1,368 1,393 Total number of shares which may be obtained (*) 835,160 1,214,760 1,187,460 1,287,980 1,750,900 2,696,500 3,774,800 3,785,500 3,717,700 Of which: Number of shares that Group Management may obtain 335,200 484,800 550,400 548,000 538,000 810,400 924,800 936,200 914,800 Number of corporate officers concerned 14 20 19 19 19 20 18 18 17 (**) Start 11/16/1997 11/21/1998 11/20/1999 11/19/2001 11/18/2002 11/16/2003 11/22/2004 11/22/2005 11/21/2006 of exercise or or or or or or or period 11/20/2002 11/19/2003 11/18/2004 11/16/2005 11/22/2005 11/22/2006 11/21/2007 Expiry date 11/15/2003 11/20/2004 11/19/2005 11/18/2006 11/17/2009 11/15/2010 11/21/2011 11/21/2012 11/20/2013 Subscription/ Purchase price (*) 17.53€ 21.42€ 28.47€ 29.54€ 40.63€ 37.72€ 40.22€ 23.53€ 35.67€ Discount on average share price 20% 20% 10% 5% 00000 Options outstanding at December 31, 2003 (*) 0 335,700 773,874 1,038,880 1,670,900 2,637,700 3,694,800 3,703,900 3,717,700 * As the Company carried out a four-for-one stock split in June 2002, all numbers of shares relating to dates prior to June 2002 have been multiplied by four to facilitate comparisons. The same applies to the options outstanding at December 31, 2003, for which the exercise/subscription prices have been divided by four. ** The list of the 17 members of the Group Management is provided on pages 31 and 32. *** In addition, a specific grant of 20,000 purchase options at an exercise price of ¤33.11 was carried out on March 30, 2000.

18 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:15 Page 19

Stock purchase options granted to each corporate officer and options exercised in 2003

Number of options Exercise Expiry granted price date Stock options granted to each corporate officer and options exercised in 2003 • Jean-Louis Beffa 240,000 €35.67 (*) November 2006 • Gianpaolo Caccini 40,000 €35.67 (*) November 2006 Options exercised in 2003 by each corporate officer • Jean-Louis Beffa 28,000 €28.47 November 2005 144,000 €29.54 November 2006 • Gianpaolo Caccini 12,000 €17.53 November 2003 3,000 €21.42 November 2004

Stock options granted to the ten largest recipients other than corporate officers and options exercised by these individuals

Number of options Unit granted/Number of shares price subscribed or purchased Options granted in 2003 by the issuer and any Group company granting options, to the ten largest recipients of options among employees of the issuer or any other Group company granting options 570,000 €35.67 (*) (aggregate figure) Exercise in 2003 of options granted by the issuer and any Group Average company granting options, to the ten largest recipients weighted of options among employees of the issuer or any other 91,100 price Group company granting options (aggregate figure) €21.27

(*) As mentioned above, the vesting of half of the options is conditional upon the Saint-Gobain share price outperforming the exercise price by more than 20% on the exercise date. There are no other outstanding stock option plans or any other options on shares in Group companies in France or abroad, whether publicly traded or not.

Saint-Gobain share buybacks and cancellations

In the course of 2003, the Company bought back buybacks. During the same period, 304,430 Saint-Gobain 6,784,000 of its own shares in accordance with the author- shares were sold to option holders on the exercise of their izations granted by the Ordinary and Extraordinary options, for a total of €8.8 million. No shares were can- General Meetings of June 6, 2002 (prospectus dated May 7, celed in 2003. However, in January 2004, the Board of 2002 bearing COB approval no. 02-527) and June 5, 2003 Directors canceled 6,799,832 treasury shares reducing the (prospectus dated May 6, 2003, bearing COB approval no. number of shares making up the Company’s capital from 03-386). The shares were purchased for a total of €238.2 347,824,967 at December 31, 2003 to 341,025,135 at January million and no derivative instruments were used for the 29, 2004.

SAINT-GOBAIN • 2003 ANNUAL REPORT 19 ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:15 Page 20

Saint-Gobain today

Information on the Group can also be obtained from the Information policy Compagnie de Saint-Gobain website as can presentations to financial analysts: www.saint-gobain.com The Investor Relations department is responsible for implementing the Group’s information policy with the The following e-mail address has also been set up for financial community, investors and shareholders. The shareholders: [email protected] Department – which is headed by Florence Triou-Teixeira (Tel.: +33 (0)1 47 62 33 33 - Fax: +33 (0)1 47 62 50 62) – A Minitel service 3615 code GOBAIN (€0.15/min), (a video- answers requests for information about the Group and text system operated by France Telecom) is also available regularly issues a Letter to Shareholders, as well as a for shareholders, financial analysts, stockbroking firms, Shareholder's Handbook. portfolio managers and individuals. This provides current information regarding the Group and the market price of Saint-Gobain its shares and enables shareholders to contact Saint- Financial Communications Department Gobain correspondents directly. Les Miroirs - 92096 La Défense Cedex - France Toll-free number (France): 0800 32 33 33 Through BNP Paribas, Compagnie de Saint-Gobain makes available to its shareholders a number of complementary In 2003, Saint-Gobain organized several meetings with its services to improve the administration of their fully regis- shareholders in France – in Marseille in March, Rouen in tered shares. For full details, please contact Compagnie de June, Versailles in September, and Grenoble and Nancy in Saint-Gobain’s Investor Relations Department, or: December. The Company also took part, for the sixth time, in the Salon Actionaria event held in November in Paris. In BNP Paribas addition to the two annual meetings with analysts and Les Collines de l’Arche journalists held in January and July in Paris and London at GIS - EMETTEURS the time of the publication of estimated results, several 75450 Paris Cedex 09 - France other information meetings took place during the year in Toll-free number (in France): 0 800 03 33 33 the European cities where the Company's shares are listed, Toll-free fax (in France): 0 800 77 25 85 as well as in the United States and Japan.

2004 financial calendar

2003 estimated results: January 29, 2004, after close of trading on the Paris Bourse 2003 results: March 25, 2004, after close of trading on the Paris Bourse First-quarter 2004 sales: April 27, 2004, after close of trading on the Paris Bourse General Meeting: 3:00 p.m. on June 10, 2004 at the Palais des Congrès (Porte Maillot), Paris Dividend payment date: June 24, 2004 First-half 2004 results: July 29, 2004 Sales for the first nine months of 2004: October 26, 2004, after close of trading on the Paris Bourse

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Corporate Governance

group, she has held positions of Chairman, Supervisory Board Board of Directors member or permanent representative on the Board of Directors or the Supervisory Board at various subsidiaries and Compagnie de Saint-Gobain upholds the principles of cor- affiliates of CNCE and CDC Finance – CDC Ixis, positions she porate governance defined by the Committees chaired by stepped down from in the second half of 2003. Marc Viénot and Daniel Bouton, and implements in full the She owns 1,200 Saint-Gobain shares. recommendations that they have issued, which have been 26-28 rue Neuve Tolbiac - F-75658 Paris Cedex 13, France brought together in the October 2003 report issued by AFEP-MEDEF entitled “The Corporate Governance of Listed Rolf-E. Breuer Companies”. Chairman of the Supervisory Board of Deutsche Bank AG Rolf-E. Breuer, 66, of German nationality, is also Chairman of Board of Directors the Supervisory Board of Deutsche Börse AG, a member of the Supervisory Boards of E.ON AG and Bertelsmann AG, At March 1, 2004, the membership of the Board of Directors and a Director of Landwirtschaftliche Rentenbank and of Compagnie de Saint-Gobain was as follows: Kreditanstalt fûr Wiederaufbau (KfW). He is a member of the Consultative Committee of C.H. Boehringer Sohn, and Jean-Louis Beffa Chairman of Bundesverband Deutsche Banken e.V. In 2003, Chairman and Chief Executive Officer Rolf-E. Breuer was also Vice-Chairman of the Supervisory Jean-Louis Beffa, 62, is also Vice-Chairman of the Board of Board of Siemens AG and a member of the Supervisory Directors of BNP Paribas, a Director of the Bruxelles Lambert Board of Deutsche Lufthansa AG, but he stood down from Group, a member of the Supervisory Board of Le Monde S.A. these positions during the year. and Société Editrice du Monde S.A., President of Claude He owns 4,516 Saint-Gobain shares. Bernard Participations SAS and a member of the Taunusanlage 12, D-60262 Frankfurt am Main, Germany Supervisory Board of Le Monde Partenaires SAS. Within the Saint-Gobain Group, he is the Company’s permanent repre- Paul A. David sentative on the Board of Saint-Gobain PAM, a Director of Professor of Economics at the Universities of Stanford and Saint-Gobain Cristaleria and Saint-Gobain Corporation, and Oxford joint Chairman of the corporate foundation, Saint-Gobain Paul A. David, 69, a U.S. citizen, is Professor of Economics at Center for Economic Research. He is also Vice-Chairman of Stanford University (USA), and Emeritus Professor of the Supervisory Board of the Pension Reserve Fund. Jean- Economics and Economic History at the University of Louis Beffa owns 210,000 Saint-Gobain shares. Oxford (United Kingdom). He does not hold any other direc- Les Miroirs, 92096 La Défense Cedex, France torships. He owns 800 Saint-Gobain shares. Stanford University, Department of Economics, Stanford, CA Daniel Bernard 94305-6072, United States of America Chairman and Chief Executive Officer of Carrefour Daniel Bernard, 58, is also a Director of Alcatel. Within the Jean-Martin Folz Carrefour group, Daniel Bernard is Chairman of G S, Vice- Chairman of the Management Board of Peugeot SA Chairman of Dia S.A., a Director of Eterco, Grandes Jean-Martin Folz, 57, is also a Director of Solvay (Belgium). Superficies de Colombia, Presicarre, Centros Comerciales Within the PSA group, he is Chairman of the Board of Carrefour and Finiper, as well as Chief Executive Officer of Directors of Automobiles Peugeot and Automobiles Carrefour Americas Ltda, Chief Operating Officer of SISP and Citroën, and a Director of Banque PSA Finance, Peugeot Vice-President of Vicour. Citroën Automobiles and Faurecia. Daniel Bernard owns 4,400 Saint-Gobain shares. He owns 1,200 Saint-Gobain shares. 6 avenue Raymond Poincaré - 75769 Paris Cedex 16, France 75 avenue de la Grande-Armée -75116 Paris, France

Isabelle Bouillot Sylvia Jay Isabelle Bouillot, 55, is a member of the Supervisory Board of Director General of the British Food and Drink Federation Accor and a Director of La Poste.Within the Caisse des Dépôts Lady Jay, 57 a British citizen, is also a Director of Carrefour.

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She is a lay member of the Procedures and Disciplinary Michel Pébereau Committee of the General Council to the Bar, Industrial Chairman of the Board of Directors of BNP Paribas Governor of the British Nutrition Foundation, a trustee of Michel Pébereau, 62, is also a Director of Lafarge and Total, a the Pilgrim Trust and the Entente Cordiale Scholarships member of the Supervisory Boards of AXA and Dresdner Scheme and a member of the Council of Food from Britain Bank, and a non-voting Director of Galeries Lafayette. and the Franco-British Council. She owns 800 Saint-Gobain Within the BNP Paribas group, he is a Director of BNP shares. Paribas UK. In addition, he is Vice-Chairman of the 6 Catherine Street, London WC2B 5JJ, United Kingdom International Monetary Conference, a member of the International Advisory Panel of the Monetary Authority of Pierre Kerhuel Singapore and the International Capital Markets Advisory President of the Saint-Gobain Employees' and Former Committee of the Federal Reserve Bank of New York. Employees' Shareholders' Association and Chairman of He owns 820 Saint-Gobain shares. the Supervisory Board of the Group Savings Plan Mutual 3, rue d'Antin – 75002 Paris, France Funds Pierre Kerhuel, 60, is Director in charge of the Building Denis Ranque Materials division of Saint-Gobain. Up until March 31, 2003 Chairman and Chief Executive Officer of Thales he also held the position of Deputy Chief Operating Officer Denis Ranque, 52, is also Chairman of the Board of Directors at Saint-Gobain Terreal. He owns 800 Saint-Gobain shares. of l’Ecole Nationale Supérieure des Mines de Paris and of Les Miroirs - 92096 La Défense Cedex, France the Cercle de l’Industrie, a Director of the Fondation de l’Ecole Polytechnique, and a member of the Advisory José Luis Leal Maldonado Committee of the Banque de France. He owns 800 Saint- Chairman of the Spanish Banking Association Gobain shares. José Luis Leal Maldonado, 64, of Spanish nationality, is also a 45, rue de Villiers - 92526 Neuilly-sur-Seine, France Director of CEPSA, Alcatel España and Renault España, as well as Saint-Gobain Cristalería. Bruno Roger He owns 4,000 Saint-Gobain shares. President of Lazard Frères SAS C/Velasquez, 64-6e E-28001 Madrid, Spain Bruno Roger, 70, is also a Director of Cap Gemini Ernst & Young and Sofina (Belgium), and a member of the Sehoon Lee Supervisory Boards of AXA and Pinault Printemps Redoute. Co-Chairman of Hankuk Glass Industries and Hankuk Within the Lazard Group, he is a member of the Supervisory Sekurit (South Korea) Board of Eurazeo (having been Chairman until July 2003). Sehoon Lee, 54, of South Korean nationality, is also He owns 48,040 Saint-Gobain shares. Chairman of the Board of Directors of Saint-Gobain 121 Boulevard Haussmann – 75008 Paris, France Hanglas Asia and SL Investment Ltd. He owns 1,000 Saint-Gobain shares. Eric d’Hautefeuille, who was appointed Director of Youngpoong Building, 33 Seorin-dong, Jongno-gu, Seoul Compagnie de Saint Gobain in June 1999, passed away on 100-752 (Korea) January 17, 2004. Holding the title of “Ingénieur en chef des Mines”,he took the helm of Saint-Gobain’s Insulation Division Gérard Mestrallet in 1982 before going on to head the Flat Glass Division in Chairman and Chief Executive Officer of Suez 1992. He was subsequently appointed Chief Operating Officer Gérard Mestrallet, 54, is also a member of the Supervisory of Compagnie de Saint-Gobain in 1996 and held this office Boards of AXA and Taittinger, and a Director of Crédit until 2000 when he retired. He remained a Director until his Agricole and Pargesa Holding. Within the Suez group, death earlier this year. The Chairman and the Board of Gérard Mestrallet is the Chairman of Suez-Tractebel Directors gratefully acknowledge the contribution he made (Belgium) and of Hisusa (Spain),Vice-Chairman of Sociedad over the years to the Group. General de Aguas de Barcelona and a Director of Electrabel (Belgium). In 2003 he was also Chairman of Société Générale de Belgique and Tractebel, Vice-Chairman of Chief Operating Officer: Hisusa and a non-voting Director of Casino. Gianpaolo Caccini He owns 840 Saint-Gobain shares. Gianpaolo Caccini, 65, is also Director of Nexans and JM 16 rue de la Ville-l’Evêque - 75008 Paris, France Huber Corporation. Within the Saint-Gobain Group he is a

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Director of Saint-Gobain Corporation. He owns 4,820 Saint- ■ Isabelle Bouillot and José-Luis Leal Maldonado: June 1998; Gobain shares. ■ Daniel Bernard: June 2000; ■ Jean-Martin Folz: March 2001; At its meeting of November 20, 2003, the Board of Directors ■ Paul A. David and Sylvia Jay: June 2001; appointed M. Christian Streiff as Chief Operating ■ Sehoon Lee: November 2002; Officer, with effect from April 1, 2004. ■ Pierre Kerhuel, Gérard Mestrallet and Denis Ranque: June 2003. A graduate of the Ecole des Mines de Paris, Christian Streiff, 49, was previously Senior Vice-President of Compagnie de The Ordinary and Extraordinary General Meeting of June 5, Saint-Gobain and had also been President of the Group’s 2003 reduced the duration of Directors’terms of office from Ceramics and Plastics and Abrasives Divisions since October six to four years. This reduction applies to terms of office 2001. Within the Group he held in 2003 the positions of granted on or after June 5, 2003 and not to those in force at Chairman of SEPR and Saint-Gobain Abrasives, Chairman that date. The dates on which Directors' terms of office and Chief Executive Officer of Saint-Gobain Advanced expire are therefore as follows: Ceramics Corp., Chairman of the Board of Directors of ■ Jean-Louis Beffa, Isabelle Bouillot, Sylvia Jay and José Luis Carborundum Ventures Inc., Saint-Gobain Ceramics & Leal Maldonado: 2004 Annual Meeting; Plastics Inc. and Saint-Gobain Performance Plastics Corp., ■ Rolf-E. Breuer, Jean-Martin Folz, Michel Pébereau and Managing Director of Saint-Gobain KK, and a Director of Bruno Roger: 2005 Annual Meeting; Grindwell Norton Ltd. He owns 3,200 Saint-Gobain shares. ■ Daniel Bernard: 2006 Annual Meeting; ■ Paul A. David, Pierre Kerhuel, Sehoon Lee, Gérard Mestrallet Secretary to the Board of Directors: and Denis Ranque: 2007 Annual Meeting. Bernard Field, Corporate Secretary of Compagnie de Saint-Gobain. Acting upon a recommendation of the Appointments Committee, the Board of Directors will be submitting for approval at the next Annual General Meeting, scheduled to Membership of the Board of Directors take place on June 10, 2004, the renewal of the terms of office of Jean-Louis Beffa, Isabelle Bouillot, Sylvia Jay and Acting upon a recommendation presented by the José-Luis Leal Maldonado for a period of four years. Appointments Committee,in 2003 the Board of Directors once again reviewed the independence of each Director in compli- Jean-Louis Beffa, 62, is Chairman ance with the criteria established in the AFEP-MEDEF report and Chief Executive Officer of on corporate governance issued in September 2002. It was Compagnie de Saint-Gobain. He subsequently concluded that in accordance with the above graduated from the Ecole criteria, the following are independent Directors: Daniel Polytechnique, the Ecole Nationale Bernard, Isabelle Bouillot, Paul Allan David, Jean-Martin Folz, Supérieure du Pétrole and the Sylvia Jay, Gérard Mestrallet and Denis Ranque. This corre- Institut d’Etudes Politiques de sponds to seven Directors out of fourteen at March 1, 2004 Paris. He also holds the title of (taking into account the vacant position on the Board as Eric “Ingénieur en chef des Mines”. After starting his career at d’Hautefeuille passed away on January 17, 2004). The Board the Oil Division of the French Ministry of Industry, Jean- does not include any Director elected by employees (although Louis Beffa joined the Saint-Gobain Group in 1974 as Vice does include a Director representing employee shareholders), President Corporate Planning. In 1978 he was appointed or non-voting Directors. In accordance with the Company Chief Executive Officer of Pont-à-Mousson before going on bylaws, each Director must own at least 800 shares. to become Chairman of that company and President of the Group’s Pipe and Mechanics Division in 1979. He joined the Renewal of the board of directors Group’s General Management team in 1982 and was appointed Chairman and Chief Executive Officer of Saint- The dates on which Directors were first elected are as Gobain in January 1986. His term of office as director was follows: renewed for six years in June 1992 and again in June 1998. ■ Jean-Louis Beffa and Bruno Roger: February 1987; In July 2002, in accordance with the Loi sur les nouvelles ■ Rolf-E. Breuer and Michel Pébereau: June 1993; regulations économiques, the Board of Directors decided ■ Gérard Mestrallet: November 1995; that he should continue to be responsible for the general

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management of Compagnie de Saint-Gobain and therefore Sylvia Jay,57, is a British citizen retain the title of Chairman and Chief Executive Officer. and is the Director General of Jean-Louis Beffa is also Vice-Chairman of the Board of the British Food and Drink Directors of BNP Paribas, a director of the Bruxelles Lambert Federation. Group, a member of the Supervisory Board of Le Monde S.A. She has previously held several and Société Editrice du Monde S.A., President of Claude positions as a senior British civil Bernard Participations SAS and a member of the servant, in the Overseas Supervisory Board of Le Monde Partenaires SAS. Within the Development Administration Saint-Gobain Group, he is the Company’s permanent repre- (ODA) and in secondment to the French Ministry of sentative on the Board of Saint-Gobain PAM, a director of International Cooperation, the French Treasury and the Saint-Gobain Cristaleria and Saint-Gobain Corporation, and European Bank for Reconstruction and Development joint Chairman of the corporate foundation, Saint-Gobain (EBRD). Center for Economic Research. He is also Vice-Chairman of Sylvia Jay is also a director of Carrefour. She is a lay member the Supervisory Board of the Pension Reserve Fund. Jean- of the Procedures and Disciplinary Committee of the Louis Beffa owns 210,000 Saint-Gobain shares. General Council to the Bar,Industrial Governor of the British Nutrition Foundation, trustee of the Pilgrim Trust and the Isabelle Bouillot,55, is a member Entente Cordiale Scholarships Scheme, and a member of of the Supervisory Board of Accor the Council of Food from Britain and the Franco-British and a director of La Poste. She Council. Sylvia Jay owns 800 Saint-Gobain shares. holds a degree in public law and She was elected as a director of Compagnie de Saint-Gobain graduated from the Institut in June 2001. d'Etudes Politiques de Paris and the Ecole Nationale d'Adminis- José Luis Leal Maldonado,64,is a tration. She started her public Spanish citizen. He has a law career within the French Budget Department before being degree from the University of appointed Cabinet Director for the Employment Minister in Madrid and a Political Sciences 1982 and going on to work as Deputy Cabinet Director for degree from the University of the Economy and Finance Minister between 1983 and 1984. Geneva. He also has a degree in She then held the post of Chairman at l'Union des Banques Statistics and a doctorate in eco- à Paris between 1985 and 1986 before becoming a nomics from the University of Paris. Government Representative for the Department for the After lecturing at the University of Nanterre for five years, he Control of Financial Operations between 1986 and 1989 went on to work at the OECD for a further five-year period. (Mission de contrôle des activités financiers). She was an In September 1977 he was appointed as Director General for economic advisor to the French President between 1989 economic policy in Spain, a post he held until February 1978 and 1991 and then the Budget Director of the Economy and when he became Secretary of State for economic co-ordina- Finance Ministry from 1991 to 1995. In June 1995, she joined tion and planning. In April 1979 he was appointed as Spain’s Caisse des Dépôts et Consignations as Deputy Chief Minister of the Economy, a position he held until September Operating Officer where she was responsible for managing 1980. banking and finance activities. She went on to become Between 1981 and 1990 José Luis Leal Maldonado acted as Chairman of the Management Board of CDC Finance-CDC an economic advisor for Banco de Vizcaya and held the posi- IXIS, before standing down from the position in the second tion of Vice Chairman at Banco Bilbao Vizcaya. He is cur- half of 2003. She has also resigned from her positions as rently Chairman of the Spanish Banking Association. Chairman, member of the Supervisory Board or permanent He is a director of Saint-Gobain Cristaleria, a Spain-based representative on the Board of Directors or Supervisory Group subsidiary, and of CEPSA, Renault (Spain) and Alcatel Board which she held in various subsidiaries and affiliates (Spain). He is also the Chairman of “Dialogo”, an association of CNCE and CDC Finance - CDC Ixis within the Caisse des to promote Franco-Spanish amity, and of Accion Contra el Dépôts Group. Hambre. He is Vice-Chairman of Fundacion Abril Martorell Isabelle Bouillot was a member of the Financial Markets and a member of Real Patronato del Museo del Prado and Council from 1997 until October 2003. Fundacion Duques de Soria. José Luis Leal Maldonado owns She owns 1,200 Saint-Gobain shares. 4,000 Saint-Gobain shares. Isabelle Bouillot was elected as a director of Compagnie de He was elected as a director of Compagnie de Saint-Gobain Saint-Gobain in June 1998. in June 1998.

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At the General Meeting of June 10, 2004 shareholders will The purpose of the Internal Rules of the Board of also be invited to elect Gianpaolo Caccini as a Director, to Directors is to establish an organizational and operational replace Eric d’Hautefeuille who passed away earlier this framework for the Board, as summarized below. year. Subject to shareholder approval, his term of office will correspond to the remainder of Mr d’Hautefeuille’s term, ■ Board meetings. At least seven ordinary meetings should expiring at the close of the Annual General Meeting to be be held annually, including one at a different Group site called in 2005. each year.The Directors may attend meetings by means of videoconferencing technology to the extent allowed by Gianpaolo Caccini was born in law. 1938 and is an Italian citizen. He has a doctorate in Chemistry from ■ Provision of information to Directors prior to meetings the University of Pavia in Italy. He and on a continuing basis. The notice of each meeting joined the Saint-Gobain Group in should be accompanied by a selection of financial analy- 1973 as Sales Director for the ses and press articles concerning the Group. In addition, Insulation Division of the Italian the texts of statements and presentations featured on the subsidiary, Balzaretti Modigliani. agenda, the draft annual report, and draft consolidated He was appointed as Director of the Sealings Division of and Company financial statements should be sent to the that company in 1980, before going on to become Chief Directors prior to the meetings at which they are to be Executive Officer of Vetrotex Italia in 1983 and a director of discussed.The information pack provided at each meeting Vitrofil in 1986 (two companies within the Group’s should include an analysis of Group operating income Reinforcements Division). He was then appointed and net indebtedness, as determined at the month-end Chairman and Chief Executive Officer of Saint-Gobain preceding the meeting. Between meetings, the Directors Desjonquères (Containers Division) in 1988, President of the should systematically receive all press releases issued by Insulation Division in 1991 and also of the Reinforcements the Group and, where appropriate, all useful information Division in 1993. In 1996 he became Senior Vice-President of concerning significant events or operations for the Group. Compagnie de Saint-Gobain and General Delegate for In general, the Directors are entitled to request any addi- North America. Then in 2000, he went on to become Chief tional information deemed necessary for the conduct of Operating Officer of Compagnie de Saint-Gobain, a position Board Meetings, and to ask to meet key members of he held until his retirement on April 1, 2004. Group management without the corporate officers being Gianpaolo Caccini is also a director of Nexans and JM Huber present, after consulting with the Chairman of the Board. Corporation (United States) and Chairman of the Italian Association of Glass Manufacturers. ■ Deliberations of the Board. In addition to the delibera- He owns 4,820 Saint-Gobain shares. tions related to its duties under the applicable laws and regulations and the Company’s bylaws, the Board reviews and finalizes the Saint-Gobain Group’s corporate strategy Operational structure at least once annually. The prior approval of the Board is of the Board of Directors required for investments, restructuring programs, acquisi- tions, and the purchase and divestment of equity stakes Pursuant to the Loi sur les nouvelles regulations économiques, with a unit value in excess of €150 million, as well as for the Board of Directors decided in July 2002 that Jean-Louis any significant transaction outside the Group’s stated Beffa, Chairman of the Board of Directors, would continue to strategy. The operation of the Board should be discussed be responsible for the general management of Compagnie at least once each year, and a formal evaluation of its de Saint-Gobain for the term of his directorship, with the title organization and operation should be performed on a of Chairman and Chief Executive Officer. Acting upon the rec- regular basis under the supervision of the Appointments ommendation of the Chairman and Chief Executive Officer, Committee. Based on the report submitted by the the Board of Directors subsequently decided that Gianpaolo Appointments Committee, the Board reviews the inde- Caccini would continue to exercise the duties of Chief pendence of each Director in compliance with the criteria Operating Officer. established in the AFEP-MEDEF report dated September In accordance with the recommendations of the AFEP- 2002.The Directors may meet without the presence of the MEDEF report on corporate governance dated September corporate officers to evaluate said officers’ performance 2002, the Board of Directors issued internal rules of oper- and to consider the general management of the Group in ation in the course of 2003. future.

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■ Board committees. The work and deliberations of the by the Appointments Committee and was performed by Board of Directors are prepared by the Financial Statements consulting firm Egon Zehnder International,whose consult- Committee and the Appointments Committee, whose ants held individual discussions with each Director on the members are appointed by the Board. The committees may basis of responses to a prior, detailed questionnaire cover- commission technical appraisals by outside experts at the ing the structure, operation and effectiveness of the Board. expense of Compagnie de Saint-Gobain and confer with These discussions led to the formulation by the consultants members of Group Management, after consulting with the of comments and recommendations on the operation of Chairman of the Board. The Internal Rules governing the the Board of Directors, which were included in a report by Board of Directors establish the terms of reference of the the Appointments Committee that was examined and dis- Financial Statements Committee and the Appointments cussed at a Board meeting. The consultants found that the Committee, notably concerning their respective duties. Said Directors held a unanimously positive view of the Group’s duties are presented below in the sections concerning the management and the operation of the Board and that a individual committees. limited number of improvements and new procedures were deemed necessary. These changes relate to the ■ Dealing in Compagnie de Saint-Gobain shares by strengthening of the Board’s industrial and scientific know- Directors. Without prejudice to legal and regulatory provi- how, the presentation of and submission deadlines for sions concerning insider trading, periods are defined information provided prior to meetings, the organization of annually during which the Directors are required to discussions, the development of interaction between abstain from carrying out any direct, indirect or derivative Directors and non-executive management, the organiza- transactions relating to Saint-Gobain shares. These peri- tion of the strategy formulation process and the involve- ods cover the 45 days preceding the Board meetings at ment of the Board in the work of the Appointments which the estimated annual consolidated financial state- Committee on Chairman succession planning. ments and the interim consolidated financial statements are discussed, the 15 days preceding the meeting dealing In 2003, in application of Commission des Opérations de with the final version of the annual consolidated financial Bourse (COB) recommendation 2002-01, the Company statements and the day following each of said meetings(1). published on the COB website declarations by the Group’s Directors and corporate officers with regard to transac- ■ Attendance fees. The Internal Rules specify the allocation tions in the second half of 2002 and the first half of 2003 of attendance fees among the Directors.The rules govern- concerning the subscription, purchase or sale of Saint- ing said allocation are presented below in the correspon- Gobain shares (excluding stock options) and any forward ding section. financial instruments relating to Saint-Gobain shares. According to these declarations, no such transactions had ■ Various provisions of the Internal Rules provide for the taken place. possibility of further training for Directors with regard to business lines and sectors, and the accounting, financial The Board of Directors held seven meetings during fiscal and operational aspects of the Group. They also deal with 2003. The overall attendance rate was 88%. the attendance of Directors at shareholders’ meetings, and establish the duty of confidentiality binding upon Board of Directors’ committees Directors in respect of documents, information and the deliberations of the Board. Financial Statements Committee

Michel Pébereau, Chairman Evaluation of the operation Isabelle Bouillot of the Board of Directors Gérard Mestrallet (until June 2003) Jean-Martin Folz (since June 2003) As in 2000(2), the Board commissioned a formal evaluation of its operation during 2003. The evaluation was overseen Two-thirds of the Committee is composed of independent directors (see page 23).

(1) The Group’s top executives and employees with access to “sensitive”information are also subject to these restrictions. The Internal Rules of the Board of Directors define the (2) 2000 Annual Report, page 55. duties of the Financial Statements Committee as follows.

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The main responsibility of the Financial Statements Statutory Auditors, and performed a prior, in-depth examina- Committee is to ensure the relevance and consistency of the tion of the estimated annual consolidated financial state- accounting methods used to prepare the financial state- ments (January), the annual Company and consolidated ments and to verify that the internal procedures used to financial statements (March), as well as the interim consoli- gather and control the related data provide a guarantee of dated financial statements (July). such relevance and consistency. To this end, the Committee: On each of these occasions, a summary of the main points ■ examines the annual and interim consolidated financial raised by the Statutory Auditors with the Finance statements and the annual accounts of the Company sub- Department during the preparation of the financial state- mitted to it by General Management, prior to their examina- ments was reviewed in the presence of the Statutory tion by the Board of Directors; Auditors, notably concerning significant risks and off-balance sheet commitments. ■ considers the scope of consolidation and, where appropri- ate, the reasons for the exclusion of any companies from the A status report on asbestos-related litigation in the United consolidation process; States was presented regularly to the Committee. In conjunc- tion with the Statutory Auditors, the Committee conducted a ■ examines significant risks and off-balance sheet commit- detailed review of the financial impact and accounting impli- ments, and receives a related explanatory report from the cations of asbestos-related litigation on the U.S. subsidiaries Finance Director; concerned and the Group as a whole. The findings of this review were subsequently presented to the Board of ■ gives its opinion on the organization of the internal audit Directors. function, is informed of the internal audit work schedule and receives a summary internal audit report on a regular basis; The Committee was further informed by each of the Statutory Auditors of the amount of fees received from Group ■ reviews the audit plan of the Company’s Statutory Auditors companies during 2002 in relation to statutory audits, legal and the findings of their audits, and receives a report from and tax services, and advisory services. The sole significant the Statutory Auditors on key audit findings and the account- fees concerned the implementation of ERP (Enterprise ing methods selected; Resource Planning) systems at non-French subsidiaries by the consulting entity of PricewaterhouseCoopers (PwC), ■ conducts the process for the selection of the Company’s which left the PwC network upon its disposal effective Statutory Auditors, forms an opinion on the amount of fees September 30, 2002. At a subsequent meeting, the charged for the performance of statutory audits and submits Committee approved a procedural rule that strictly defines the results of the selection process to the Board of Directors; the services that may be commissioned from the Statutory Auditors and members of their network by Saint-Gobain ■ examines, in compliance with applicable standards, the Group companies and services that are prohibited. This pro- advisory and other services directly related to their engage- cedural rule came into force throughout the Group on ment that the Statutory Auditors and their network are October 1, 2003. authorized to provide to the Company and to other compa- nies in the Saint-Gobain Group; In addition, the Committee reviewed the budget for 2003 and considered several issues relating to changes in accounting ■ is informed annually by the Statutory Auditors of the standards. It also reviewed the reports on central treasury amount and allocation of fees for audit, advisory and other operations for the year ended December 31, 2002 and the services paid by the Saint-Gobain Group to the Statutory treasury operations of the Scandinavian Delegation in 2002, Auditors and the members of their network during the past the Internal Audit Department’s 2002 activity report and fiscal year, and submits its findings to the Board of Directors, audit schedule for the first half of 2003, as well as Doctrine together with its opinion on the independence of the briefs issued by the Finance Department in 2003. Statutory Auditors. The Committee met five times in 2003. The overall atten- The Committee also met individually and privately with the dance rate at meetings was 100%. deputy finance director in charge of financial control and At the first three meetings, the Committee reviewed issues consolidation operations, the deputy finance director in with Group Management, the Finance Department and the charge of treasury and financing operations and the head of

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the internal audit department, in compliance with the rec- ■ It makes recommendations to the Board of Directors ommendations of the AFEP-MEDEF report dated September regarding the amount and conditions of compensation, par- 2002. ticularly the criteria governing the variable portion, and pen- sion benefits awarded to the Chairman of the Board, and The Committee examined, approved and launched the com- other arrangements relating to the status of Chairman. petitive bidding process for the selection of the Company’s Statutory Auditors. ■ It likewise makes recommendations regarding the compen- sation of the Chief Executive Officer and/or of the Chief The Committee presented its conclusions to the Board of Operating Officer(s). Directors at meetings held on January 23, March 20, July 24, September 18, and November 20, 2003. ■ It reviews the Group’s general stock options policy,including the choice between share subscription options and share purchase options, and considers the recommendations of Appointments Committee General Management concerning the granting of share sub- scription or purchase options to employees of the Saint- Bernard Esambert (until June 2003) Gobain Group. Gérard Mestrallet (since June 2003), Chairman Daniel Bernard ■ It formulates recommendations regarding the granting of Bruno Roger share subscription or purchase options to the Chairman of the Board of Directors and to other members of Group Two-thirds of the Committee is composed of independent Management. directors (see page 23). ■ It submits corporate governance issues for examination by The Appointments Committee also performs the work of a the Board of Directors, and conducts a periodic evaluation of remunerations committee, as provided for in the AFEP- the organization and operation of the Board of Directors. MEDEF reports on corporate governance. The Committee met three times in 2003. The overall atten- In accordance with the Internal Rules of the Board of dance rate at meetings was 100% Directors, the duties of the Appointments Committee are as follows. The Committee’s first task was to address the issue of appointments to be recommended at the General Meeting to ■ The Committee is charged with making recommendations fill expiring directorships and submitted its proposals at a to the Board of Directors whenever a directorship becomes subsequent Board meeting. It examined and approved draft vacant or expires. The Committee organizes a selection pro- amendments to the bylaws with a view to reducing directors’ cedure for future independent directors, in compliance with terms of office from six years to four years and the establish- the criteria laid down in the AFEP-MEDEF report dated ment of an age limit for the Chairman and Chief Executive September 2002. Officer, Chief Executive Officer, Chief Operating Officer and the Chairman of the Board of Directors(3). The Committee’s ■ Each year,the Committee reviews the independence of each findings were reported to the Board. Director in compliance with the criteria established in the AFEP-MEDEF report dated September 2002 and presents its The Committee further examined the new recommenda- conclusions to the Board of Directors. tions put forward in the AFEP-MEDEF report dated September 2002 and submitted its related proposals to the ■ It considers and makes recommendations to the Board Board of Directors. It commissioned a formal evaluation of regarding the appointment of the Chairman of the Board of the operation of the Board of Directors by the consulting firm Directors, whatever the reason for the vacancy. (3) The functions of Chairman and Chief Executive Officer,Chief Executive Officer and Chief Operating Officer come to an end no later than the close of the General Meeting ■ It considers the recommendation(s) of the Chairman of the called to approve the financial statements for the year during which the incumbents Board regarding the appointment of a Chief Executive Officer reach the age of 65.The functions of Chairman of the Board of Directors come to an end no later than the close of the General Meeting called to approve the financial and/or of one or several Chief Operating Officers, and reports statements for the year during which the incumbent reaches the age of 68 (Articles accordingly to the Board. 14 and 15 of the bylaws).

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Egon Zehnder International and presented the findings to The Board of Directors decided to allocate the amount the Board (see below). according to the following rules: ■ The Chairman of the Company does not receive attendance The Committee was also advised of the draft Internal Rules of fees. the Board of Directors and arranged the examination by the Board of the director independence criteria laid down in the ■ Each of the other members of the Board of Directors is allo- AFEP-MEDEF report dated September 2002. cated an annual lump sum of €16,000, to which is added €2,200 for each meeting attended. As is the case each year, the Committee reviewed Saint- Gobain’s stock options(4) policy and finalized its recommen- ■ In addition, each Director who is a Chairman or member of dations to the Board of Directors concerning the number of the Financial Statements Committee or Appointments beneficiaries and their breakdown and the nature of options Committee is respectively allocated an annual lump sum of granted, as well as the general and specific conditions for €4,600 or €1,600, to which is added €1,600 for each exercising the options and the performance conditions to Committee meeting attended. which a proportion of these options is subject. Prior to pre- senting them to the Board, the Committee reviewed the pro- ■ Lump-sum amounts are paid on an accruals basis when posed allocations of stock options based on the objectives as terms of office begin or end in the course of the period. defined and finalized its proposals for options to be granted to Group Management(5). ■ Payments are made in arrears at the end of each half-year and any remaining balance in the allocated annual amount The Committee further made recommendations to the is distributed at the outset of the following year proportion- Board concerning the criteria to be applied to determine the ally to attendance at Board meetings during the previous variable portion of corporate officers’ compensation for 2003 year. (see below). Attendance fees paid for fiscal 2003 amounted to €500,000, After conducting individual interviews, the Committee final- unchanged from the previous year. ized its recommendation to the Board concerning the replacement of Gianpaolo Caccini by Christian Streiff as Chief The net(6) individual amounts of attendance fees paid by the Operating Officer from April 1, 2004. Company to its Directors (including both lump-sum and vari- able payments) for 2003 were as follows: Daniel Bernard The Committee presented its conclusions to the Board of €33,361, Isabelle Bouillot €44,719, Rolf-E. Breuer €19,649, Paul Directors at the meetings of March 20, September 18 and A. David €25,385, Bernard Esambert (7) €20,931, Jean-Martin November 20, 2003. Folz €38,460, Eric d’Hautefeuille €23,649, Sylvia Jay €25,385, Pierre Kerhuel(8) €16,811, José Luis Leal Maldonado €25,385, Sehoon Lee €25,385, Jean-Maurice Malot(7) €17,093, Gérard Remuneration of Directors Mestrallet €40,399, Michel Pébereau €45,169, Bruno Roger €41,010, Denis Ranque(8) €16,810. The Ordinary and Extraordinary General Meeting of June 28, 2001 set the annual amount of attendance fees payable to Directors at €500,000. Remuneration of Corporate Officers

The gross fixed remuneration, as well as compensation in (4) A description of the stock options policy and details of existing plans are given on kind, paid for fiscal 2003 to Jean-Louis Beffa, Chairman and pages 17 to 19. Chief Executive Officer, and to Gianpaolo Caccini, Chief (5) See pages 31 and 32. Operating Officer, by Group companies(9) was unchanged (6) After deduction of the 25% withholding tax for Messrs. Breuer, David and Leal € € Maldonado, and Lady Jay, whose tax residence is outside France. from 2002, i.e. respectively 980,000 and 490,000. (7) For the period covering January 1 to June 5,2003, the date on which Messrs.Esambert and Malot’s term of office came to an end. Two-thirds of their gross variable remuneration for 2003 is (8) For the period covering June 5,2003, the date of appointment, to December 31,2003. based on a quantitative criterion in the form of a predeter- (9) The total gross remuneration paid by Group companies to Jean-Louis Beffa and Gianpaolo Caccini during 2003 amounted respectively to €1,665,000 and €898,000. mined earnings per share target. The remainder is condi- These amounts include remuneration for both 2002 and 2003. tioned by qualitative considerations that are defined and

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assessed by the Appointments Committee.The gross variable Remuneration levels for members of Group Management are remuneration may not be more than 1.6 times the amount of set with the dual aim, on the one hand of placing them on a the gross fixed remuneration. The estimated gross variable par with remuneration levels in comparable industrial amount which should be paid for 2003 by Group companies groups and on the other, structuring them in a way that comes to €1,070,000 for Jean- Louis Beffa (€660,000 for ensures that the personal work of these individuals con- 2002) and €535,000 for Gianpaolo Caccini (€330,000 for tributes to growth in the Group’s results. 2002)(1). To define a remuneration structure meeting these two crite- Messrs. Beffa and Caccini do not receive any attendance fees ria, Group Management commissioned specialized consult- for their functions as corporate officers carried out in Group ants to produce specific studies. companies. Remuneration for members of Group Management has for several years included a variable portion which is directly linked to the individual’s personal involvement in leading an Remuneration of Group Management organization.This principle is gradually being rolled out to all European countries which requires the development of pay Attendance fees paid by the subsidiaries of Compagnie de schemes taking into account quantifiable data such as return Saint-Gobain to Directors representing the Group, particular- on assets (ROA) or return on investment (ROI), as well as more ly Group Management, are either transferred by the individ- qualitative objectives such as the development of a specific ual to the company which employs him or her, or are paid business line or the setting up of Group operations in a new directly to the company. country.

For companies in which the Group has interests but which The remuneration of members of Group Management is are not members of the Group, attendance fees paid to the now clearly tied to management by objectives, requiring Chairman of Compagnie de Saint-Gobain are fully repaid to intense personal commitment on their part, with the possi- the Company. bility of significant changes in pay from one year to the next according to results.

The total direct and indirect remuneration received in 2003 from French and foreign Group companies by Group Management, as presented below, amounted to €12.7 million (1) The total gross remuneration paid by Group companies to Jean-Louis Beffa and (the amount for 2002 was €13 million), of which the variable Gianpaolo Caccini during 2003 amounted respectively to €1,665,000 and €898,000. These amounts include remuneration for both 2002 and 2003. portion represented €4.5 million (€4.6 million in 2002).

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Group Management

The members of Group Management were as follows at December 31, 2003:

Executive Functional General Delegates Management Management Olivier du Boucheron Jean-Louis Beffa Jean-Claude Lehmann General Delegate to Benelux Chairman Vice-President, Research Jean-Claude Breffort and Chief Executive Officer Nicole Grisoni-Bachelier General Delegate to Brazil and Gianpaolo Caccini Vice-President, External Relations Argentina Chief Operating Officer Laurent Guillot Roberto Caliari Jacques Aschenbroich Vice-President, Corporate Planning General Delegate to Italy and Greece Senior Vice-President Sonia Sikorav Gilles Colas Pierre-André de Chalendar Vice-President, Purchasing General Delegate to the Asia-Pacific Senior Vice-President region

Philippe Crouzet Jean-Pierre Floris Senior Vice-President Presidents General Delegate to Spain, Portugal Emile François of the Divisions and Morocco Senior Vice-President Jean Laronze Jacques Aschenbroich Jean-François Phelizon General Delegate to Poland, Ukraine President, Flat Glass Division Senior Vice-President and Moldavia Roberto Caliari Christian Streiff Niels Christian Lärsen President, Reinforcements Division Senior Vice-President General Delegate to the Nordic Pierre-André de Chalendar Countries and the Baltic States Bernard Field President, Building Materials Corporate Secretary Anand Mahajan Distribution Division General Delegate to India

Peter Dachowski Paul Neeteson Executive Comittee President, Insulation Division General Delegate to Germany Martin Ellis and Central and Eastern Europe Jean-Louis Beffa President, Building Jean-François Phelizon Gianpaolo Caccini Materials Division General Delegate to Philippe Crouzet Jérôme Fessard the United States and Canada President, Containers Division Bernard Field Guy Rolli Claude Imauven General Delegate to Mexico, Secretary to President, Pipe Division Venezuela and Colombia the Executive Committee Laurent Guillot Christian Streiff Patrick Roux-Vaillard President, Ceramics General Delegate to the United & Plastics Division Kingdom and the Republic of Ireland President, Abrasives Division

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Saint-Gobain today

Group Management

Christian Streiff having been appointed Chief Operating Officer with effect from April 1, 2004 to replace Gianpaolo Caccini, who has retired, the composition of Group Management was as follows at that date:

Executive Functional General Delegates

Management Management Olivier du Boucheron Jean-Louis Beffa Jean-Claude Lehmann General Delegate to Benelux Chairman and Chief Executive Officer Vice-President, Research Roberto Caliari Christian Streiff Nicole Grisoni-Bachelier General Delegate to Italy and Greece Chief Operating Officer Vice-President, External Relations Benoît Carpentier Jacques Aschenbroich Isabel Marey-Semper General Delegate to Spain, Portugal Senior Vice-President Vice-President, Corporate and Morocco and Strategic Planning Jean-Claude Breffort Gilles Colas Senior Vice-President Sonia Sikorav General Delegate to the Asia-Pacific Vice-President, Purchasing region Roberto Caliari Senior Vice-President Jean-Pierre Floris General Delegate to Brazil Pierre-André de Chalendar Presidents and Argentina Senior Vice-President of the Divisions Jean Laronze Philippe Crouzet Jacques Aschenbroich General Delegate to Poland, Ukraine Senior Vice-President President, Flat Glass Division and Moldavia Jérôme Fessard Jean-Philippe Buisson Niels Christian Lärsen Senior Vice-President President, Reinforcements Division General Delegate to the Nordic Emile François Countries and the Baltic States Roberto Caliari Senior Vice-President President, Ceramics & Plastics Anand Mahajan Claude Imauven Division General Delegate to India Senior Vice-President Pierre-André de Chalendar Paul Neeteson Jean-François Phelizon President, Building Materials General Delegate to Germany Senior Vice-President Distribution Division and Central and Eastern Europe

Bernard Field Peter Dachowski Jean-François Phelizon Corporate Secretary President, Insulation Division General Delegate to the United States and Canada Américo Dénes Executive Comittee President, Abrasives Division Guy Rolli General Delegate to Mexico, Jean-Louis Beffa Martin Ellis Venezuela and Colombia Christian Streiff President, Building Materials Division Patrick Roux-Vaillard Philippe Crouzet General Delegate to the United Bernard Field Jérôme Fessard Kingdom and the Republic of Ireland President, Containers Division Secretary to the Executive Committee Claude Imauven Isabel Marey-Semper President, Pipe Division

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Report of the Chairman of the Board of Directors

On the organization and preparation of the work of the Board , the internal control procedures implemen- ted by Compagnie de Saint-Gobain and possible limitations on the powers of the Chief Executive Officer.

This report has been prepared in accordance with Article a) Internal Audit Department 117 of the Financial Security Act (Loi de sécurité financière) The role of the Internal Audit Department is to verify the of August 1, 2003. existence and effective operation of risk management mechanisms at all Group companies. Internal Audit staff I – Organization and preparation are partly assigned to the Company’s head office and partly to the Group’s principal General Delegations. The of the work of the Board of Department carries out about 180 engagements each year Directors that are the subject of summary reports submitted to the Group’s General Management and to the Financial All of the information required by law concerning the organ- Statements Committee of the Board of Directors. ization and preparation of the work of the Board of Directors is presented above in the sections dealing with the mem- The Department’s reports are also submitted in their entire- bership, renewal, operational structure and committees of ty to the Group’s Statutory Auditors, who in turn report to the Board of Directors (pages 36 to 41), referred to herein. the Internal Audit Department following audits and assess- ments of internal control, environmental risks and the II – Internal control procedures computer system. This close co-operation between the Internal Audit Department and the Statutory Auditors is implemented by Compagnie de based on respect for the independence of each party and is Saint-Gobain one of the cornerstones of Saint-Gobain’s internal control system. The internal control procedures implemented by Compagnie de Saint-Gobain represent a body of princi- The Internal Audit Department’s mandate includes gen- ples and rules that are intended to ensure the security of eral reviews and reviews of specific processes. Risk identi- the transactions carried out by the Company and thereby fication is conducted jointly by the Company’s Internal the achievement of the Company’s objectives in terms of Audit Department, the Divisions and the General performance, profitability and the safeguarding of assets. Delegations. Each year, the internal audit plan is submit- The procedures further ensure that the accounting, finan- ted for review to the Group’s General Management and to cial and management information communicated to the the Financial Statements Committee of the Board of Company’s governing bodies accurately reflects the Directors. Company’s operations and financial position, and that the prevailing laws and regulations are complied with. The findings of each audit are recorded in a report that states the objectives and scope of the audit. In the case of General organization of the internal control general reviews, a graded evaluation of the level of internal system of Compagnie de Saint-Gobain control is performed. Observations made during the audit and the responses received from the audited company give 1.Internal control structures rise to conclusions, recommendations and an action plan to which the audited company must adhere. A particular Compagnie de Saint-Gobain’s internal control system is person is designated to follow up each recommendation founded on the Group’s matrix organization comprising and a deadline for implementation is established. Divisions (business units) and General Delegations (geo- graphic regions), and on functional departments that are A progress report on the implementation of the action directly or indirectly assigned to the internal control of risk plan is submitted on a half-yearly basis to the Internal management mechanisms. The principal functional Audit Department and the Divisions until all recommen- departments are presented below. dations have been fully implemented.

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After the implementation period, the Internal Audit is issued with recommendations that enable site man- Department performs a follow-up audit to assess the agement to craft an action plan. progress made by companies whose initial grade was To cover the risks of the industrial and commercial units unsatisfactory. in respect of property damage and third-party liability, the Risks and Insurance Department directly contracts and b) Environment, Health and Safety Department manages a number of international insurance policies. The Environment, Health and Safety (EHS) Department for- The Department also evaluates the quality of other poli- mulates and coordinates the Group’s policy in respect of the cies in force. environment,and health and safety.The EHS Department has produced a Reference Manual,referred to below, that must be e) Treasury and Financing Department complied with by the management of the industrial units. The Treasury and Financing Department defines the The Department assesses the application of the recommend- financing policy for the entire Group (Company, General ed procedures by means of in-depth audits that take place at Delegations and subsidiaries). the discretion of the Divisions and operating units or follow- Treasury operations are monitored regularly: ing a decision from the parent company. The evaluation grid spans 20 stages. Audits are conducted by auditors from the ■ The Company’s Treasury and Financing Department is Group who also play an operational role in environmental, audited on an annual basis. This audit reviews treasury health and safety compliance and have received appropriate transactions carried out during the year, even those com- training in audit techniques.The process is doubly rigorous in pleted at December 31, and looks at content and the related that sites are assessed by auditors from a different Division of risks incurred, where appropriate. The Statutory Auditors the Group. also examine treasury transaction records as part of their During 2003, a total of 133 EHS audits were performed within annual audit. the Group, in five countries. New information systems are audited upon entry into serv- Adherence to EHS procedures is also verified by the Internal ice or subsequently.The Statutory Auditors may also review Audit Department during general reviews. The communica- systems in place to assess the level of internal security. tion of the findings of these audits within a formal frame- work helps the EHS Department and the Internal Audit Department to coordinate their actions. ■ Each year, the Internal Audit Department reviews the treas- The EHS Department also actively promotes the develop- ury transactions of the General Delegations on a rotating ment of self-diagnostic techniques within the Group. basis to assess compliance with the Treasury and Financing Department’s policy and the quality of internal controls. c) Information Systems Department In addition to its general functions concerning information ■ In the case of subsidiaries, the internal control of treasury systems, the Information Systems Department is charged transactions is an integral part of the general reviews per- with formulating the Group’s policy in respect of the security formed by the Internal Audit Department. It is also includ- of information systems and computer networks. ed in the examinations performed by the subsidiaries’ A body of rules and best practices concerning information sys- Statutory Auditors. tems and networks has been assembled in the form of gener- al principles and technical standards, which are regularly At Group level, the treasury position is monitored monthly updated in parallel with technological advances. based on the calculation of gross and net indebtedness. A The Information Systems Department formulates and coordi- detailed analysis is performed by currency, interest rate and nates an annual self-diagnostic plan based on ISO 17799. The maturity,before and after the impact of any derivative finan- plan aids the evaluation of progress made by Group compa- cial instruments used. Issues of commercial paper or treas- nies and triggers corrective measures, as needed. A total of 361 ury notes, which raise funds to meet the Group’s short-term sites performed self-diagnostic tests during 2003. financing needs, are also reported on a monthly basis. Given the special role played by Compagnie de Saint-Gobain in the d) Risks and Insurance Department Group’s financing, the structure of its debt, broken down The Risks and Insurance Department defines the Group’s between active and passive positions, is likewise analyzed industrial risk management policy. The Department monthly. Each month, the Treasury and Financing issues guidelines on cover, referred to below, and organiz- Department also reports to the Finance Department on the es visits to key sites (about 180 in 2003) by external audit treasury transactions performed during the month, with a engineers. Upon completion of each assignment, a report particular emphasis on derivative financial instruments.

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f) Financial Control to meet the Group’s general objectives in terms of respect The Financial Control function performs in-depth analyses for the environment and the prevention of accidents and of the financial impact of investments, acquisitions, divest- occupational illnesses. The approach is based on key risk ments, mergers and corporate actions proposed by the identification stages, the implementation of preventive Divisions, irrespective of the amounts involved. Financial measures, and effectiveness monitoring and evaluation. Control staff also receive the opinions of the departments and the General Delegation concerned on related legal, tax The EHS guidelines are available on the Group’s intranet and social issues.Their findings are then forwarded through and are circulated to all Group establishments. the Company’s Finance Department to the Group’s General Management for decision-making. c) General rules and procedures governing the security of information systems 2.Internal control procedures at Compagnie In conjunction with the Company’s Doctrine Department, de Saint-Gobain the Information Systems Department keeps an up-to-date record of general and detailed rules and procedures that Compagnie de Saint-Gobain has developed a large body of prescribe best practices in the field of information system internal control procedures governing its own organization management and communication. and that of its subsidiaries. Key procedures are presented The self-diagnostic plan includes references to Doctrine rules. below. d) Industrial risk prevention manual a) Group Doctrine The risk prevention manual developed by the Risks and The financial, administrative and management procedures Insurance Department provides guidance for site managers applicable to Group companies are the responsibility of and their teams concerning the necessary preventive meas- Compagnie de Saint-Gobain’s Doctrine Department. They ures to be taken in an industrial context. The manual pre- together compose a body of rules, methods and procedures scribes the rules to be applied, instructions for the conduct of enshrined in roughly 600 texts that can be accessed on the site visits by insurance engineers, preventive and protective Group’s intranet. measures, post-incident feedback, safety mechanisms to be These rules, methods and procedures are organized into incorporated into future projects, and operating procedures broad sections: and methods. ■ organization, management and administration; ■ financial information system; This methodical approach enables sites to progress towards ■ Group consolidation; the implementation of procedures and the deployment of ■ accounting and tax; the appropriate preventive measures. ■ financial reporting; ■ financial reporting; e) Internal operating procedures of the Company, ■ International Financial Reporting Standards. Divisions, and General Delegations The Doctrine Department establishes rules for the entire The activities of the Company’s departments – in particular, Group that serve as the basis for Group companies’ own the Treasury and Financing Department, the Accounting internal procedures. and Securities Department and the Consolidation Department – are governed by internal operating proce- The formulation and validation of Doctrine briefs are sub- dures. Thus, for each member of staff at the central Treasury ject to a procedure that brings together the functional and Financing Department or within the Group’s other departments concerned.The next stage is initial validation treasury-related services, the field of competence, duties, by the Doctrine Committee, composed of Finance Directors obligations and authorized financial instruments are set out at the Division and Delegation levels, as well as the in a Doctrine brief. Other Doctrine briefs deal with, for exam- Company’s functional managers. The final validation is ple, responsibilities, powers and control, the treatment of performed by the Finance Committee, composed of the comfort or guarantee letters and the management of bank Company’s Finance Director, the principal Finance accounts. Directors at the Division and Delegation levels, and the Company’s functional managers. The Divisions and Delegations have developed internal pro- cedures to meet their specific needs,alongside the principles b) Environment, Health and Safety Reference Manual prescribed by the Group Doctrine. The EHS Reference Manual explains the action to be taken

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Saint-Gobain today

Organization of internal control for the A summary version of these documents is sent to the preparation and processing of the finan- Finance Department and General Management each cial and accounting information made month. available to shareholders Any errors are identified and corrected in the following 1.Parent company accounts month.

Financial information must be provided to shareholders, 2.Group consolidated financial statements partners and third parties in accordance with French legal requirements. This process is underpinned by The consolidated financial statements are prepared by the defined accounting standards and principles, including Group Consolidation and Reporting Department. This the generally accepted principles of going concern, con- Department is also charged with the updating of consoli- sistent application of accounting methods, equality dation procedures, the consolidation of subsidiaries, the between opening shareholders’ equity and closing processing of reporting data and the maintenance of con- shareholders’ equity at the previous period-end, match- solidation tools. ing of costs with revenues, segregation of accounting periods and substance over form. a) Group accounting standards The consolidated financial statements are prepared in accor- a) Organization of the accounting function dance with French generally accepted accounting principles. The organization of the accounting function is based on the These principles are laid down in the Group Doctrine. The rules, methods and procedures prescribed in Group Doctrine Consolidation Department provides information and period- briefs. ic training for the subsidiaries, in consultation with the Divisions and Delegations. For this purpose, the Department It is intended to facilitate the monthly reconciliation and jus- has a consolidation manual, an intranet site and training tification of accounts, with the related events reconstructed software in French and English. to form an audit trail. The occurrence of significant events should be anticipated and the most suitable accounting In the light of the Group’s adoption of IFRS effective January 1, entry recorded for each case. Early error detection and pre- 2005, a large amount of resources has been earmarked to vention are also central concerns. meet the greater need for training and information system adaptations in 2004. The chart of accounts is linked to the Group’s financial infor- mation system and is adapted in line with transaction classi- b) Organization of the Group consolidation process fication requirements.The principle of materiality is observed. The Group consolidation process involves consolidation groups and sub-groups that are hierarchically accountable to Each item of data is entered once in a specific, integrated the Divisions and functionally accountable to the Group module of the SAP software. Consolidation and Reporting Department. This process, which mirrors the Group’s organization based on Divisions b) Internal control (business units) and General Delegations (geographic In addition to control of compliance with payment proce- regions), is intended to ensure the reliability of accounting dures and the dual signature requirement for secure pay- data through the monitoring and processing of information ment methods, the Accounting Department’s role in inter- close to operational staff. nal control includes guaranteeing the fulfillment of the responsibilities defined by General Management and c) Processing of information and control of accounting data enshrined in responsibility centers called “cost centers”. Each subsidiary submits its reporting package in accor- dance with a schedule fixed by the Company. The data are To this end, the Department sends monthly schedules to checked and processed at the level of each Division, the heads of the cost centers to enable them to verify that reviewed by the appropriate General Delegation and then costs incurred pursuant to payment orders signed by them passed up to the Consolidation Department, which exam- have, indeed, been dealt with and to compare actual ines all packages and makes the necessary consolidation monthly and aggregate expenditure with the initial budget. adjustments.

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The consolidated financial statements are subsequently thorough examination of each consolidated company’s examined by the Statutory Auditors in accordance with estimated income statement and balance sheet, in the professional standards. Subsidiaries’ accounts are exam- presence of the Finance Manager and Tax Manager con- ined by their local auditors, who adapt procedures in keep- cerned. Companies’ accounts are thus analyzed in detail ing with local legal requirements and the size of the com- from an accounting and tax standpoint, prior to final clos- panies concerned. ing. This procedure enables the early detection of errors and the adoption of corrective measures during the nor- d) Consolidation tools mal closing phases. The software used for the preparation of the accounts is equipped with a powerful and efficient database that is This interaction between the Company, Divisions and matrix-based like Saint-Gobain itself.The software can han- General Delegations is a key element of the Group’s inter- dle database information at the various consolidation levels nal control system governing the financial and accounting and centralizes all data contained in the Group database in information provided to shareholders. a transparent manner. The consolidation software also feeds into a communica- A detailed, consolidated report is sent to the Company’s tion tool that transmits information to General General Management on a monthly basis. These monthly Management, Divisional Management and the General results are supplemented by comments and analyses sub- Delegations, thereby providing internal control of informa- mitted by the Consolidation Department. tion output.

e) Reliability of accounting data underpinned by the III – Possible limitations on the reporting process The reporting process ensures the reliability of the infor- powers of the Chief Executive mation contained in the Group’s interim and annual Officer financial statements.

Pre-closing procedures are applied ahead of the June 30 As the Chairman of the Board of Directors continues to be and December 31 period-ends. Pre-closing meetings are responsible for the general management of Compagnie de held at which the principal financial and tax managers of Saint-Gobain, there are no limitations on the powers asso- the Company, Divisions and General Delegations perform a ciated with the role of Chief Executive Officer.

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Saint-Gobain today

Statutory auditors of the Company

As of December 31, 2003, the Statutory Auditors of the B KPMG Audit, a department of KPMG S.A., Company were: 1, Cours Valmy 92923 Paris-La-Défense, France represented by Jean Gatinaud and Gilles Salignon ■ PricewaterhouseCoopers Audit, 32 rue Guersant, 75017 Paris, France, represented by Pierre Coll and Christian The Board of Directors will also recommend at the same Marcellin, reappointed on June 25, 1998 for a term of six Annual General Meeting the appointment as the years expiring at the 2004 Annual General Meeting. Company’s Substitute Statutory Auditors of:

■ La Société d'Expertise Comptable Economique et C Yves Nicolas, 32,rue Guersant, 75017 Paris, France Financière (SECEF), 3 rue de Turique, 54000 Nancy, France, represented by Jacques Tenette and Francis Vallet, reap- D Jean-Paul Vellutini, 1, Cours Valmy pointed on June 29, 2000 for a term of six years expiring at 92923 Paris-La-Défense, France the 2006 Annual General Meeting. After consultation with the Company’s General Management, SECEF has decided to Yves Nicolas and Jean-Paul Vellutini will replace respectively resign as from the Annual General Meeting of June 10,2004. Daniel Chauveau, 11 Rue Margueritte, 75017 Paris, France, whose term of office will expire at the close of the Annual As stated above (see the section on the Financial Statements General Meeting of June 10, 2004, and Pierre-Henri Scacchi Committee on pages 26 to 28), following the competitive et Associés, 8-10 Rue Pierre Brossolette, 92300 Levallois- bidding process launched in September 2003 under the Perret, France, whose resignation will take effect as from the supervision of the Financial Statements Committee, the Annual General Meeting of June 10, 2004. Board of Directors decided in March 2004 to recommend to shareholders at the Annual General Meeting of June 10, In accordance with Articles L. 225-228 and L. 820-3 of the 2004 the reappointment and appointment respectively as French Commercial Code, the above-mentioned auditors the Company’s Statutory Auditors of: have provided the following information:

A PricewaterhouseCoopers Audit, 32 rue Guersant 75017 Paris, France represented by Pierre Coll and Christian Marcellin

38 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:17 Page 39

PricewaterhouseCoopers Audit Audit has also informed Compagnie de Saint-Gobain of the total amount of fees received by the network for services pro- For the purpose of the renewal of its term of office as Statutory vided to Compagnie de Saint-Gobain and its subsidiaries that Auditors, PricewaterhouseCoopers Audit has informed were not directly related to statutory audits. Compagnie de Saint-Gobain of its membership of the PricewaterhouseCoopers international network, whose activi- The fees paid by Compagnie de Saint-Gobain and its sub- ty is not confined to statutory audits and whose members sidiaries to PricewaterhouseCoopers Audit and members of its have a common economic interest. PricewaterhouseCoopers network are presented in the table below:

2003 2002

(in € millions) Amount % Amount % Audit • Statutory audit and contractual audits France 2.8 20% 2.9 13% Outside France 7.7 55% 8.0 36% TOTAL 10.5 75% 10.9 49% • Other engagements 1.7 12% 1.1 5% SUB-TOTAL 12.2 87% 12.0 54% Other services • Legal and tax advisory services France ---- Outside France 1.7 12% 1.7 8% TOTAL 1.7 12% 1.7 8% • Information technology (a) France --0.1 0% Outside France --8.4 38% TOTAL --8.5 38% • Internal audit ---- • Other 0.1 1% 0.1 0% SUB-TOTAL 1.8 13% 10.3 46% TOTAL 14.0 100% 22.3 100%

(a) Corresponding to services relating to the implementation of Enterprise Resource Planning systems carried out by the network’s consulting entity, prior to its dis- posal on September 30, 2002.

In the past two years, PricewaterhouseCoopers Audit has not examined the merger or transfer transactions carried out by Compagnie de Saint-Gobain or companies controlled by it within the meaning of paragraphs I and II of Article L. 233-16 of the French Commercial Code.

SAINT-GOBAIN • 2003 ANNUAL REPORT 39 ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:17 Page 40

Saint-Gobain today

KPMG S.A. In the past two years, KPMG S.A. has not examined the merger or transfer transactions carried out by Compagnie de Saint- KPMG S.A. is an accounting and audit firm with a Gobain or companies controlled by it within the meaning of Management Board and a Supervisory Board, and is a mem- Article L. 233-16 of the French Commercial Code. ber of KPMG International. KPMG International is a coopera- KPMG S.A. does not breach any of the conflict-of-interest tive incorporated under Swiss law and provides no services to restrictions provided for by the French Commercial Code. clients. All services are provided by the member firms of KPMG The fees paid by Compagnie de Saint-Gobain and its sub- International, which are independent legal entities. sidiaries to the member firms of KPMG International are pre- sented in the table below:

2003 2002

(in € millions) Amount % Amount % Audit • Statutory audit and contractual audits France 0.3 10% 0.3 14% Outside France 1.8 62% 1.7 77% TOTAL 2.1 72% 2.0 91% • Other engagements 0.1 3% - - SUB-TOTAL 2.2 76% 2.0 91% Other services • Legal and tax advisory services 0.4 14% 0.2 9% • Information technology ---- • Internal audit ---- • Other 0.3 10% SUB-TOTAL 0.7 24% 0.2 9% TOTAL 2.9 100% 2.2 100%

Bylaws

Saint-Gobain is a French public company regulated by Articles L. The official documents concerning the Company may be consult- 210-1 et seq. of the French Commercial Code, with its head office ed at the head office, Les Miroirs, 18, avenue d'Alsace, 92400 at Les Miroirs, 18, avenue d'Alsace, 92400 Courbevoie, France. Courbevoie, France, Financial Communications Department. It is registered with the Nanterre corporate register under reference 542039532 (activity code APE 741J), Siret number Special clauses in the bylaws 54203953200040. These are summarized below. The Company’s corporate purpose may be summarized as the carrying out and management in France and elsewhere of all Capital stock industrial, business, financial, plant, equipment and property The bylaws require the disclosure to the Company of each frac- operations related to industrial and commercial activities, tional direct or indirect holding of 0.50% of the capital or voting notably through its French and foreign subsidiaries and affiliated rights or any multiple of this percentage. The same obligation companies (Article 3 of the bylaws). The financial year of the exists when a direct or indirect holding falls below one of these Company is from January 1 to December 31. The Company’s legal thresholds. Violation of this obligation can be sanctioned by the term will expire on December 31, 2040 unless the Company is dis- withdrawal of voting rights exceeding the undeclared fraction, for solved prior to that date or an extension is obtained. a period of two years from the date of disclosure of the undeclared

40 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:17 Page 41

holding, if one or more shareholders holding at least 3% of share fers resulting from an inheritance or from the liquidation of the capital or voting rights so request and this is included in the min- joint estate of a husband and wife, or donations inter vivos in utes of the General Meetings (Decisions of the General Meetings respect of a husband, wife or parent entitled to share in the estate of June 23, 1988 and June 15, 1990). of an intestate do not result in the loss of the right and do not inter- Furthermore, the Company can request information relating to rupt the two-year period referred to in the previous paragraph. the composition of shareholdings and the owners of its shares in Voting by mail is subject to the conditions and restrictions laid accordance with legislation and regulations in force. down in legal and regulatory provisions.

Board of directors Appropriation of net income The Company has a Board of Directors made up of at least three An amount of at least 5% of net income, less losses of prior years members and not more than fifteen. if applicable, will be appropriated so as to set up the legal reserve Each director must own at least eight hundred Company shares required by law. This appropriation ceases to be obligatory when (Ordinary and Extraordinary General Meetings of June 24, 1999, the legal reserve is 10% of the capital. Further appropriations June 28, 2001 and June 5, 2003). must be made if the reserve falls below 10% of the capital. Distributable income is comprised of the net income for the year, General meetings less losses brought forward from prior years and any amount to Any shareholder may attend a general meeting in person or be be appropriated to reserves as a result of legal or statutory represented by proxy, subject to providing proof of identity and requirements, plus any retained earnings. evidence of ownership of shares as indicated in the notice of Out of distributable income, the General Meeting appropriates meeting, at least five days before the date of the General Meeting successively: and in accordance with legal requirements concerning the atten- 1. Amounts judged appropriate by the Board of Directors to set up dance of shareholders at a general meeting. However, the Board contingency or extraordinary reserves, or to be carried forward to of Directors may decide to shorten or waive this mandatory lead the following year; time provided the change is applied to all shareholders equally. 2. From any remaining balance, the amount necessary to pay A shareholder may be represented only by his/her spouse or by shareholders a preliminary dividend of 5% on their fully paid-up another shareholder. Legal entities that hold shares may be rep- and non-redeemed shares, without, however, conferring a right, if resented at meetings by their legal representatives or by any the profit of a year does not permit such a distribution, to claim other person so designated by the legal representative. any such unpaid amounts in future years; The voting rights attached to each share belong to the beneficial 3. Amounts available after such appropriations to be distributed owner at all shareholders’ general meetings. Each shareholder to shareholders. has the right, without any limitation, to the number of votes The General Meeting which approves the financial statements attached to or represented by the shares held. for the year has the power to grant to each shareholder, in respect However, double voting rights are granted in respect of all fully of all or part of a dividend or an interim dividend to be distrib- paid-up shares registered for two years in the name of the same uted, the choice of payment in cash or in shares. shareholder. In addition, when the capital is increased by the cap- italization of reserves, profits or issue premiums, a right to a dou- ble vote is granted on issue to each bonus share distributed free Regulated agreements entered of charge to a shareholder owning shares giving rise to this right (Decision of the General Meeting of February 27, 1987). into during the year Any share converted into bearer form or whose ownership is transferred loses the right to a double vote. Nevertheless, trans- No new regulated agreements were entered into in 2003.

SAINT-GOBAIN • 2003 ANNUAL REPORT 41 ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:17 Page 42

Saint-Gobain today

Statutory Auditor’s report

Prepared in accordance with the final paragraph of Article L.225-235 of the French commercial code, on the report of the Chairman of the Board of Directors of Compagnie de Saint Gobain on the internal con- trol procedures relating to the preparation and processing of financial and accounting information.

To the shareholders,

In our capacity as the Statutory Auditors of Compagnie de require that we carry out the necessary procedures to Saint-Gobain and in accordance with the final paragraph assess the fairness of the information set out in the of Article L. 225-235 of the French Commercial Code, we Chairman’s report on the internal control procedures hereby report to you on the report prepared by the relating to the preparation and processing of financial and Chairman of your Company in accordance with Article L. accounting information. These procedures included: 225-37 of the French Commercial Code, for the year ended a. acquiring an understanding of the objectives and gen- December 31, 2003. eral organization of the internal control system, as well as Under the responsibility of the Board of Directors, it is for of the internal control procedures applicable to the prepa- the Company’s management to determine and imple- ration and processing of financial and accounting infor- ment appropriate and effective internal control proce- mation, as set out in the Chairman’s report; and, dures. The Chairman is required to report on the condi- b. acquiring an understanding of the work underlying the tions governing the preparation and organization of the information presented in the Chairman’s report. work of the Board of Directors and the internal control pro- cedures implemented within the Company. Based on these procedures, we have no matters to report in respect of the information provided concerning the Our responsibility is to provide you with our observations Company’s internal control procedures relating to the on the information and disclosures contained in the preparation and processing of financial and accounting Chairman’s report concerning the internal control proce- information, as presented in the report of the Chairman of dures relating to the preparation and processing of the Board of Directors, prepared in accordance with the accounting and financial information. provisions of the final paragraph of Article L. 225-37 of the French Commercial Code. We performed our procedures in accordance with the pro- fessional guidelines applicable in France.Those guidelines Paris, March 25, 2004

The Statutory Auditors

PricewaterhouseCoopers Audit SECEF

Pierre Coll Christian Marcellin Jacques Tenette Francis Vallet

42 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 1-P1-43-GB 18/05/04 9:17 Page 43

Special report of the Statutory Auditors on regulated agreements

To the shareholders,

In our capacity as the Statutory Auditors of Compagnie de Saint-Gobain, we are required to present a report on regu- lated agreements that have been disclosed to us. Our responsibility does not include identifying any undisclosed agreements.

We have not been advised of any new agreements governed by Article L. 225-38 of the French Commercial Code entered into during the year.

Paris, March 25, 2004

The Statutory Auditors

PricewaterhouseCoopers Audit SECEF

Pierre Coll Christian Marcellin Jacques Tenette Francis Vallet

SAINT-GOBAIN • 2003 ANNUAL REPORT 43 ST GOBAIN-CH 2-p44-65-GB 19/05/04 8:06 Page 44

II • 2003 Management Report

■ In France,economic activity shifted to an upward trend Satisfactory 2003 in the summer of 2003 after a disappointing first half.This results in a challenging turnaround was powered solely by exports, however, as global economy domestic demand remained lackluster. Consequently, at the end of the year, GDP growth figures were among the lowest since the end of the second world war. With global GDP growth at 3%, 2003 was an average year for the world economy. Overall performance was not as ■ The German economy was mired in recession in the first good as hoped for at the end of 2002, but better than half of 2003, dragging down average performance for the feared at the beginning of 2003. Spurred by the firm US Eurozone.Although German exports were given a boost by economy and buoyant Asian markets, business began to the healthier international outlook, consumer spending pick up around the globe, with capital flowing back into stagnated. There were tentative signs of an improvement the financial markets after the stock market fallout of the in the building industry, however, which should be previous two years. affirmed in the coming months.

Against a background of geopolitical tension, the US ■ In the United Kingdom, manufacturing activity remain- economy stayed the course, warding off the threat of ed limp and companies continued to hold off on capital deflation. Businesses swung back to profit and started expenditure. Conversely, consumer confidence was high, spending again, while consumer morale and household buoyed by the wealth impact of the hike in real-estate spending remained high despite widening public deficits. prices. All of this led to a slide in the dollar; which in turn, further spurred growth. ■ Italy experienced a contraction in economic activity in the first two quarters, before also benefiting from an After a period of quarantine following the outbreak of upturn in exports. Capital spending was flat however, due SARS, the Asian markets posted a robust performance. to high production overcapacity and the termination of Growth was led primarily by China, which was the world’s certain tax breaks. Meanwhile,households tightened their economic driver, fuelled by the undervaluation of the purse strings due to low employment levels and continu- yuan. Meanwhile, Japan began its long awaited turn- ing inflation. around. ■ Spain once again turned in the best showing in Europe. The European economy failed to capitalize on the world- The bright picture was nevertheless marred by the strong wide upturn, reporting its weakest figures in the post-war euro,which hurt competitiveness,as well as a property price period. After bordering on recession in the first half of bubble sparked by the overheating of the real-estate market. 2003, it began to show slight signs of improvement in the summer, in the wake of a brighter international picture. In Japan,the strong export-led recovery helped to improve However, industrial output was flat, capital spending con- the business climate. GDP annual growth rate for fiscal tinued to contract, and domestic demand tapered off. At 2003, ending on March 31, 2004, could exceed 2%. That the same time, risks of inflation continued to linger. said, the country is finding it difficult to reduce its struc- Monetary and fiscal policy remained cautious and tural deficit and despite a gradual upturn in consumer European competitiveness was – and still is – threatened spending is still suffering from falling prices and the by the strong euro. onslaught of deflation.

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In Latin America, Argentina continued to get its finances The Automotive Sector (1) under control. On the other hand, Mexico – and particu- larly the maquiladoras – lost ground to growing Chinese Across Europe,sales of new cars reached 14.2 million in 2003, competition. Despite a changing political landscape, the down 1.3% compared with 2002. Only Spain and the United Brazilian government kept a tight rein on the economy Kingdom recorded an upturn, rising 3.8% and 0.6% respec- and set about restoring public finances to a solid footing. tively.Sales of new vehicles in France fell by a sharp 6.3%,and This had an unfavorable impact on growth, with exports dropped for the fourth straight year in Germany,the Sector’s being the sole driver. main European market. They also dipped in Italy by 1.2%, reflecting the end of incentive measures that had kept the Eastern European countries proved to be star performers, market on an even keel in 2002. Meanwhile, Japanese and boosted by domestic demand and strong export showings Korean auto-makers continued to win market share. in some cases – notably Poland. New vehicle registrations in the United States eased back 1% to 16.7 million. Auto-makers – particularly the country’s The construction industry three major ones – opted to apply a looser pricing policy and grant discounts in order to keep up sales levels. 2003 was another banner year for the housing market in the United States,with record figures both for construction In Latin America, the Brazilian market contracted 3.5%, starts and purchases of existing properties. Conversely, although the country’s auto manufacturing output rose though, the non-residential market continued to contract. 2% to 1.83 million vehicles, spurred by exports. The Argentinian market, which practically ground to a halt in After two years of decline, the housing market in Europe 2002, surged 87% to 148,600 sales of new vehicles. leveled off,with performance stronger for renovations than new construction starts. Property investors were attracted In Japan, new vehicle registrations climbed 1.5% to 4.03 by the combination of low mortgage rates and tax incen- million, fuelled by a large number of launches and high tives, such as those introduced by the Robien Act in France. export levels driven by the weak yen.

■ Spain continued to lead the European pack, with a steep rise in house prices both for new build and existing con- The Electronics Sector (2) structions. International sales of semiconductors grew 9% in 2003 in ■ In France, the residential market showed no signs of volume turns, marking the turnaround awaited since softening, posting an upswing in the second half of the 2001. This recovery – which began vigorously at the end of year. Residential construction starts and building permits the third quarter before slightly running out of steam turned in a sustained performance, marked by higher towards the latter part of the year – was felt in all geo- growth figures for apartment blocks than individual graphic regions, particularly in Japan and the rest of Asia. homes. The renovation market reported stable volumes.

■ Residential housing starts in Germany rallied from September, but not enough to prevent the construction (1) Source: automobile manufacturers. market from contracting for the eighth year in a row. (2) Source:World Semi-conductor Trade Statistics.

SAINT-GOBAIN • 2003 ANNUAL REPORT 45 ST GOBAIN-CH 2-p44-65-GB 19/05/04 8:06 Page 46

2003 Management report

Results The Group’s performance was achieved in a harsh operat- ing context.The year saw a substantial rise in energy costs in line with targets and some commodity prices, as well as unfavorable exchange rates – notably for the Brazilian real, the U.S. dol- lar and pound sterling – combined with further worsening Saint-Gobain’s solid fundamentals and effective business of trading conditions in a number of the Group’s key mar- model were once again successfully put to the test in kets. For instance, the construction industry continued to 2003. Against a bleak economic backdrop, the Group met contract in Germany, and capital spending remained sub- its target of achieving a slight increase in operating dued throughout the majority of 2003 – only picking up income, excluding the currency effect. Performance was towards the end of the year – hurting the Ceramics & particularly robust in the second half of 2003, significantly Plastics and Abrasives Divisions, and, albeit to a lesser up on the first half. extent, Reinforcements. This challenging backdrop was, however,lightened by a number of positive factors,such as Operating results were strong in 2003. Like-for-like sales a firm showing from residential construction starts and climbed 2.5% and operating income edged up 0.1%. strong consumer spending in the United States, stable Operating margin was 8.3%, or 10.1% not including performance from new build and a modest rise in the ren- Distribution activities. Excluding capital gains on the dis- ovation market across Europe, combined with strong posal of non-current assets, net income decreased by a growth in most emerging countries. modest 2.9%. Based on the number of shares in circulation at December 31, 2003 (i.e. excluding treasury stock), earn- Rising to the challenge of these mixed conditions, Saint- ings per share excluding capital gains dipped by a Gobain met its price-strengthening objective, lifting sales restrained 3.2% to €3.03 from €3.13 in 2002. prices by an average 0.8% for the full year. The Flat Glass Sector stayed the course, Building Materials performed At €1,039 million, consolidated net income was on a par well as did Containers, and Building Materials Distribution with the prior-year figure of €1,040 million. Consolidated continued to make headway. Other performance factors, in earnings per share (excluding treasury stock) amounted addition to sharply lower net debt and interest expense, to €3.09 versus €3.10 in 2002. included control over capital spending and working capital.

These sound results also reflect Saint-Gobain’s stronger The Group made no major acquisitions in 2003, preferring balance sheet structure. Over the year, the Group scaled to continue supplementing growth with bolt-on acquisi- back net debt and interest expense by 19% while continu- tions. These mainly concerned Building Materials ing to generate strong free cash flow (cash flow from oper- Distribution. Several non-core businesses were sold, pri- ations less capital expenditure), which came in at €1,189 marily in the Building Materials and Ceramics and million excluding capital gains tax. Abrasives Divisions.

In millions of euros 2003 2002 2001 Net sales 29,590 30,274 30,390 Operating income 2,442 2,582 2,681 Income before profit on sales of non-current assets and taxes 1,722 1,848 1,988 Net income before minority interests 1,065 1,074 1,174 Net income 1,039 1,040 1,134 Cash flow from operations 2,471 2,673 2,733 Cash flow excluding capital gains 2,540 2,688 2,765 Capital expenditure 1,351 1,431 1,430

46 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 2-p44-65-GB 19/05/04 8:06 Page 47

Including the currency effect, Group sales dipped 2.3%. sharp increase in energy and commodity prices. Excluding the exchange-rate impact, however, they Profitability in the Group’s other operating countries, climbed 4.1% on an actual structure basis and 2.5% based including France and the United Kingdom, improved over on a comparable structure. Currency effects had a 6.1 the year, however. point negative impact on sales for the year, particularly due to the significant depreciation of the US dollar, pound The Group’s overall resilience with regard to operating sterling and Brazilian real against the euro (down 16%, 9% income was rooted in the twin drivers of higher prices and and 20% respectively). Sales volumes climbed 1.7% spurred volumes, as well as in continued efforts to contain costs. by a recovery in the second half of the year. At the same Headcount was reduced by 2.2% in the Group’s manufac- time, prices increased 0.8%. turing operations. This, combined with slightly higher sales volumes, generated a 4% increase in productivity Among the sectors, Housing Products recorded the high- compared with the 2.7% rise recorded for the year ended est like-for-like rise, posting a 3.9% gain. The increase was December 31, 2002. due to the 14.2% leap in sales by the Pipe Division on the strength of major distant export contracts. Sales in the Other contributors to the Group’s results include a 9.3% Glass Sector advanced 1.5% like-for-like, reflecting healthy reduction in net interest expense and other financial results from the Flat Glass, Insulation and Containers charges, significantly improving the interest cover ratio. Divisions which were partially offset by a contraction in Net debt was scaled back for the fourth year in a row, Reinforcements, mainly triggered by lower sale prices. down 19% year-on-year to stand at €5.7 billion at Like-for-like sales in the High-Performance Materials December 31, 2003. The Group’s gearing ratio also Sector edged up by a subdued 0.5%, due to slow capital improved, coming in at 49.3% at the year-end despite the spending which did not show any signs of recovery until negative currency effect on shareholders’ equity. the end of the year. The debt paydown is attributable to two reasons. First, ongo- On a like-for-like basis, sales were up in all geographic ing efforts to generate high free cash flow. Cash flow from areas except Europe (excluding France), which was on a operations declined 7.6% to €2,471 million, including tax on par with the 2002 figures. Sales in France and North capital gains from asset disposals.Due to the currency effect, America rose 2.7% and 2.8%, respectively, and all other capital expenditure was slightly down on the prior year, rep- countries reported a surge of 17.4%. resenting 4.6% of sales compared with 4.7% in 2002. Free cash flow stood at €1,120 million, or €1,189 million excluding Operating income decreased 5.4% at current exchange capital gains tax.The second explanatory factor is continued rates. Excluding the currency effect, it increased 1% on an headway made in reducing working capital. actual structure basis and 0.1% based on a comparable structure. Operating margin inched down from 8.5% to 8.3%, primarily on account of the strong increase in ener- At €789 million, investments in securities remained on a gy costs and some commodity prices which impacted par with 2002. This figure included €454 million for bolt- profitability in the Containers, Building Materials, on acquisitions in the Building Materials Distribution and Insulation and Pipe Divisions. In the High-Performance Ceramics & Plastics Divisions, and €229 million for share Materials Sector, however, operating margin climbed to purchases. 8.4% from 6.7% in 2002, spurred mainly by cost reduction programs implemented since 2001. Operating margin for Overall, the Group’s financial results in 2003 reflect how the Building Materials Distribution Division further Saint-Gobain strengthened its capital base while holding increased, coming in at 5%, despite continuing difficult firm against the dismal economic climate. This perform- market conditions in Germany and the Netherlands. ance was achieved by increasing sales volumes,raising sales prices, continuing to deliver productivity gains, and keeping Profitability in North America and European countries a tight control over working capital. At the same time, oper- excluding France and the United Kingdom was hit by the ating income was in line with the Group’s objective.

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2003 Management report

(in millions of euros) 2003 2002 2001 The Division is also a manufacturer of automobile parts. It Net sales 11,266 11,818 11,813 delivers front and back windshields, side windows, glass Operating income 1,178 1,325 1,357 sun-roofs and other ready-to-assemble modules to major Cash flow from operations 1,406 1,614 1,560 European and global car manufacturers. Whether lami- Capital expenditure 891 869 827 nated, colored, treated or specially coated for high-per- formance applications, the different types of flat glass are Internal sales are deducted from sales data by Sector and by Division. sophisticated high-technology products.The pace of change is extremely rapid in this field, to keep up with consumer expectations of ever greater safety and comfort through Flat Glass increased visibility, insulation and acoustic comfort. In addi- tion to automotive markets, the aeronautics and mass-tran- Flat Glass manufactures, processes and markets glass and sit industries are another significant end-use market for glazing products for two major markets, the building and the Division’s product expertise. automotive industries. Its four main business lines are flat glass manufacturing; processing and distribution for the Lastly, the Division includes under the heading of Specialty building industry; production of automotive glass; and spe- Glass a number of companies offering specific capabilities cialty glass, which includes products for home appliances, in markets such as home appliances (Euroveder, Eurokera), fireproof glass, nuclear safety glass and glass for electronics. fireproof glass (Saint-Gobain Vetrotech International), indus- trial optics, and industrial refrigeration. Another specialist Glass is manufactured in large industrial units known as subsidiary, Saint-Gobain Display Glass, produces and mar- float-glass lines.These lines produce different types of flat kets flat glass products for electronic displays. glass, ranging from basic grades in clear and colored vari- eties, through to more sophisticated glass grades incorpo- To meet the needs of its various markets, the Division has rating specific coatings or metallic oxides, which are used in adopted a customer-focused organization, with: many different applications, for example for thermal insu- – Saint-Gobain Glass for basic products; lation or sun control.The Division operates in 36 countries – Vitrages de Saint-Gobain for processing and distributing and has 29 flat glass floats, of which 11 are jointly owned. flat glass for the building industry; In addition, there are two floats currently under construction – Saint-Gobain Sekurit for the automotive and mass transit – one in Brazil and the other in India. markets; – Saint-Gobain Specialty Glass. Before being sold, two-thirds of the glass produced by Saint- Gobain’s Flat Glass plants is further processed, notably for International expansion is a constant priority for the Flat the building industry.This market is served by a network of Glass Division. Adding to its longstanding presence in all downstream processing and distribution businesses which of the major glazing markets in Western Europe, the supply an entire range of applications, from structural glaz- Division has made inroads into Brazil, Argentina and Chile ing and wall facings for major construction projects and as well as in Eastern Europe, Mexico and Korea. More urban amenities through to glazing products for industri- recently it has made significant investments in China and al carpentry, furniture, bathroom fixtures and interior dec- India. Moreover, sales offices have been established in a oration. All of these applications have led to major number of countries, including Japan and the United innovations, such as low-emission, electrochrome or elec- States, in order to boost sales of flat glass products in these trically-controlled glass, as well as shatterproof glass. markets.

48 SAINT-GOBAIN • 2003 ANNUAL REPORT ST GOBAIN-CH 2-p44-65-GB 19/05/04 8:06 Page 49

Rapport d’activité sur l’exercice 2003 Glass

Operations in 2003

Contribution to the Group 2003 2002 2001 % of net sales 14% 15% 15% % of operating income 19% 19% 21% % of cash flow from operations 22% 23% 22%

Key consolidated data (in millions of euros) 2003 2002 2001 Net sales 4,298 4,423 4,478 Operating income 471 495 551 Cash flow from operations 548 622 613 Capital expenditure 364 377 361

Internal sales are deducted from sales data by Sector and by Division.

Flat Glass sales dipped 2.8% year-on-year to €4.3 billion. The decrease was primarily due to a 5.2% negative cur- rency effect following the fall in the Brazilian real, the Mexican peso, the Korean won and the pound sterling.

Changes in Group structure had a positive impact in 2003, Torre Optima III in Mexico primarily due to the purchase of Jaroszowiec, a Poland- based screen-printing glass company.On a like-for-like basis, showing from Argentina and Colombia – although the Flat Glass sales climbed 1.9% compared with 2002,although basis of comparison was lower for these two countries. the picture was mixed across business lines and regions. Nevertheless, the overall contraction on 2002 was limited by a policy implemented in all countries except Chile to The European market in glass for the building industry strengthen prices. In Asia, sales volumes soared 36% year- remained stable compared with 2002, with no growth on-year,driving an increase in net sales against a backdrop observed The significant increase in Southern Europe (Spain of unfavorable currency effects and a strong price decline and Italy) and Eastern European countries (Poland, the Czech in Korea due to Chinese imports. Every country in the Republic, Hungary and Slovakia) could not fully offset the region contributed to the rise in sales volumes, including ground lost in Germany,France and Scandinavia.Saint-Gobain Korea, China – through SGH Nanjing –, Japan, through the Glass’s sales in this market therefore dipped 1% year-on-year. Albarino photovoltaic glass, and India.

Overcapacity arising from four competitor float lines The processing/distribution subsidiaries posted a which came onstream in 2002 continued to weigh on decrease in net sales in 2003.While partly stemming from price levels, despite efforts made to adapt production to unfavorable exchange-rate effects relating to the pound lower demand by reducing output. sterling, the decline was mainly due to a fall in prices of processed products which was even more marked than for Outside Europe, the two regions in which the Division float products and which particularly hurt the German operates turned in contrasting performances, excluding and Austrian sales networks. the currency effect which was negative across the board. Sales volumes stagnated in Latin America due to the slow- Sekurit’s sales output in Europe was up slightly on 2002,led down in the Brazilian economy and in spite of an improved by higher sales of front windshields and sun-roofs, which

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more than offset the contraction in side windows and back appliances, recorded an increase in sales in Brazil and windshields. All told, net sales rose significantly, powered Mexico, but came up against difficult operating conditions by an increase in sales of high value-added products, par- in Italy and Poland. Sales leveled off at Vetrotech – a manu- ticularly athermic windshields, laminated glass roofs and facturer of fireproof products – following many years of side windows, as well as heated and soundproof windows, strong growth. Subsidiaries of Korea-based Hanglas, mainly in France, Spain, the Czech Republic and Poland. turned in a strong showing for sales of microwave glass trays, exported from China.This segment– along with neon Sekurit’s net sales outside Europe advanced significantly, tubes – have been hurt by Asian competition. based on constant exchange rates. Brazil reported stronger prices and increased exports (including to All told, operating income for the Flat Glass Division came Europe),helping to offset the somewhat lackluster domes- to €471 million in 2003, representing 11% of sales, against tic market. China also posted strong results, on the €495 million, or 11.2% of sales, in 2002. At 2002 exchange strength of vigorous growth in the local automobile pro- rates, this corresponds to €506 million. Operating income duction market which resulted in the country’s two encap- was negatively impacted by the currency effect in Brazil, sulation plants being used to full capacity. Thailand like- Mexico, Korea and Poland. wise made major strides, thanks to a large-scale delivery of automotive glass to a Japanese client. Conversely, sales At constant exchange rates, operating income was up on were flat in Korea and contracted in Mexico. the prior year, fuelled by higher net income from Sekurit, Saint-Gobain Glass (excluding Europe) and Specialty Sales in the Transport business line were hurt by the Glass. These increases offset the decline in net income decline in the aeronautics industry.This was, however, par- from the European Building Materials operations and tially offset by the launch of two new plants: one for wind- from Vitrages de Saint-Gobain. shields for heavy goods vehicles in Italy and the other for treated glazing in Poland – to which Germany’s manufac- Outlook for 2004 turing activities in this area have been transferred. Meanwhile, the Autover line continued to notch up gains Sales volumes are expected to rise in all of the Division’s in all of its markets, except the United States. business lines and geographic regions, although the pic- ture will likely be mixed across the board. Saint-Gobain Specialty Glass, which includes the ceramic glass player Eurokera, posted a further increase in sales vol- The positive factors of this growth will be offset by two umes both in the United States and Europe. Nevertheless, adverse factors: total sales retreated due to the rise in the euro against the ■ Negative exchange-rate effects envisaged for Brazil, dollar and price decreases. Euroveder, specialized in home Mexico and the United Kingdom; ■ A decrease in average sale prices in the European con- struction market.

The Division intends to rise to these challenges by pursu- ing its strategy of enhancing the product mix – particu- larly for the Automotive market – and expanding its pres- ence in countries with the highest growth potential. Insulation and Reinforcements

The operations of the Insulation Division, born of the development of glass technology, include glass wool (TEL process), rock wool, and distribution of soundproof ceil- ings and insulation foams, which are developed in part- nership with major chemical companies.

The Division’s corporate mission is to deliver effective insulation solutions, based on the Isover brand, which Renault Mégane coupé combine comfort with safety and are environmentally

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friendly. Insulation products are marketed as rolls, panels or molded insulation. They are mainly designed for the new construction and renovation markets, for fitting on roofs, walls and flooring, to reduce heating costs or noise with a view to providing maximum comfort. Thermal and acoustic insulation standards in the building industry have been introduced in a large number of countries, pro- viding a solid basis for growth.

In addition to these uses in the building industry,a portion of sales derives from technical insulation for some of the most complex industrial facilities, or niche markets such as soil-less (hydroponic) cultivation.

In Europe, one house out of three is insulated with the Division’s products, and the proportion in the United States is one in every five. The Division ranks number one Glass fiber radome in mineral fiber* insulation products, and has operations across the globe, either as a direct producer or via its licensees. ■ develop a range of technical, logistic and commercial services, drawing on all the profitable resources made Its offering is being increasingly focused on supplying available by new technology, with a view to heightening sophisticated systems that meet ever higher performance the Division’s value added services. standards, by drawing on its recognized expertise in ther- mal insulation, fire-proofing and acoustic comfort. In this The Reinforcements Division has manufacturing opera- latter area the development of sound-proof ceilings is tions in nineteen countries,and is dedicated to serving cus- delivering on its promises, thanks to the brands Ecophon. tomers throughout the world. The current strategy of this Eurocoustic, API and Gabelex. Division is to extend its low-cost production platforms beyond Europe, grouping its two core activities – threads The Division is structured based on the world’s major and textile processing. Glass thread production is the regions, aimed at fostering manufacturing and marketing Reinforcement Division’s historic business.It was expanded synergies between countries and enabling it to respond in 1998 to include processing.This downstream activity has promptly to market needs.The aim is to maintain a steady strong growth potential, with current sales representing growth rate across all markets. over a third of total sales generated by the Division.

In industrial countries where it enjoys a long-standing The glass threads business, carried out under the Saint- leadership position*, the Division is developing new sys- Gobain Vetrotex trade name, groups a Plastics Division tems with high added value. Isover has gained a strong specialized in products for reinforcing thermoset and ther- foothold in emerging economies for all its products, suc- moplastic composite materials and a Textile Division spe- cessfully tapping the growth opportunities generated by cialized in manufacturing threads that are designed to be the climate itself and a growing demand for comfort. The woven. The key markets served are the automotive and new facility in Russia is a prime example of this. mass transit industries for vehicle bodywork, interior or motor parts, as well as the building industry, leisure equip- The overall strategy adopted by the Division hinges around ment (sports goods, boats etc.), the electrical and electronic its world brand, Isover, and is underpinned by several goals: industries,and the civil and military aeronautics industries. ■ bolster its leading position* in sophisticated thermal, acoustic and fireproof insulation systems; Textile-processing operations are grouped into a dedi- ■ step up its expansion in glass wool, its core offering; cated Saint-Gobain Technical Fabrics business unit focused ■ showcase the environmentally friendly aspects of its on weaving, coating and manufacturing finished and products; semi-finished products intended for highly diversified markets. Operations are structured around three world- * Source: Saint-Gobain. wide markets: the building industry, industrial materials

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and technical composites. In 2003, the Glass Mat business was combined into the Construction department in order to leverage synergies that already existed between the two product lines.

Overall, the Reinforcements Division currently generates 50% of sales in Eastern and Western Europe, 37% in North and South America and 13% in Asia, with the latter region offering the highest growth potential.

Within an environment that is becoming ever more com- petitive, the Reinforcements Division aims to leverage its leading position* in order to: ■ deliver added value and excellent customer service quali- ty through its preferential positioning in specialized busi- nesses, an increased Research and Development drive, and continued focus on downstream activities and distribution; ■ further contain costs, by capitalizing on its production Production of rock wool starts platforms that are located in countries with low labor at the Yegorievsk plant in Russia costs, and by standardizing best practices; ■ consolidate its global organization structure focused on at satisfactory levels and buoyant conditions prevailed in multicultural teams that strive for excellence, with a view Eastern Europe and Russia. to broadening the talent pool. The ceilings business continued to grow, mainly in Germany, the Benelux countries, Russia and Denmark, Operations in 2003 boosted by external growth in metallic frames with the acquisition of Gabelex in Portugal. Contribution to the Group 2003 2002 2001 10% 11% 11% % of net sales In the United States, sales remained fairly high despite a % of operating income 11% 14% 15% slight dip compared to 2002, as pricing pressures offset % of cash flow from operations 14% 16% 16% the benefits of higher volumes.

Key consolidated data Unfavorable euro-to-dollar exchange rates had a strong (in millions of euros) 2003 2002 2001 impact on Division sales in 2003, causing the figure to fall Net sales 3,110 3,329 3,274 slightly below its 2002 level, masking sales growth based Operating income 265 351 402 on constant exchange rates. Cash flow from operations 354 436 448 Capital expenditure 232 198 229 The Reinforcements Division, experienced difficult market

Internal sales are deducted from sales data by Sector and by Division. trends, marked by low volume growth and price erosion, mainly as a result of growing Chinese exports to Europe and In 2003, the Insulation Division turned in a very mixed the United States. A moderate recovery was, however, performance, marked by declining sale prices offset by noticeable in the fourth quarter and is expected to continue growth in sales volumes.The successful launch of the new in 2004, mostly in the textiles and electronics businesses. TEL glass wool plant in Russia drove a surge in business at the end of the year, while sales in both Europe and the In the Plastics Division, sales remained satisfactory in United States rebounded strongly in the last four months Europe where the Group enjoys a leadership position and of 2003. Sales advanced in Europe, led by a strongly posi- robust demand for specialized products such as UNIFILO® tive volume impact which was only slightly eroded by the and TWINTEX®. In the Americas, growing demand in South restrained negative effect of lower prices. America, including particularly vigorous results in Brazil, made up for a disappointing showing in the United States. Following several years of decline, the German market bot- tomed out, while business in France and Spain remained * Source: Saint-Gobain.

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In Mexico, the Division began work on the Violet plant, a ■ Glass bottles and jars for food products and beverages (soft joint venture with Owens-Corning that will specialize in drinks, juices, sauces and miscellaneous food products); producing high-end rovings. In Asia, development contin- ■ Glass flasks for perfume and pharmaceutical products; ued at a rapid pace. A new furnace was built in Hangzhou, ■ High-performance plastic pump dispensers for beauty, China; the Korean and Japanese subsidiaries were rede- personal care and cleaning products. ployed; and Thailand and India posted good results. Expanded capacity in China already allows the Division to To meet the diverse needs of both global and locally based supply the Japanese market. clients, the Division operates glass bottle and jar manufac- turing units in Europe (France, Germany, Italy, Spain and In the Textile business, prices that had been contracting Portugal), the United States, South America (Brazil, since 2001 seemed to have bottomed out at the end of Argentina), and China. 2003. Early signs of a moderate recovery were visible at the beginning of 2004, especially in Asia. Against this back- In the food and beverages sector the Division is present in drop, the Division has chosen to redeploy its capabilities all market segments. These include still wines, cham- into specialty markets and away from commodities. pagnes and sparkling wines, beer, liquor, aperitifs, fruit Toward this end, the Xicoh plant in Mexico will be ramping juices, soft drinks, mineral water, oils, baby food, instant up its production and a new furnace was commissioned in food and drinks, yogurts, desserts, etc. Hodonice, Czech Republic, to produce textile threads for use in markets other than electronics. The Division’s expertise in creating new product designs, combined with its flexible manufacturing processes and Saint-Gobain Technical Fabrics remained on a satisfactory locally based plants have enabled it to capture the top spot growth path in the Czech Republic and Asia, but saw its in Europe and the number two position in the United progress halted in the building industry and composites States*. markets in the U.S. This business line has put in place a global organization, around its three specializations of The Flasks business serves worldwide perfume and phar- Construction, Composites and Industry. European and U.S. maceutical makers from locations in Europe and the glass mat operations were included in the Construction Americas. As the world’s largest manufacturer of flasks, its department. A glass mat production line was built in design flair, wide array of glass finishes, and the excellence Litomysl in the Czech Republic. of its process controls and quality assurance methods, which are used as benchmarks for all its operations, are Outlook for 2004 widely recognized within the industry.

Growth is expected to return to insulation markets in 2004, driven by new environmental-protection and energy-saving standards. However, the Division remains cautious in its forecasts and is aiming for slight sales growth and price stability.

The Reinforcements Division,for its part,is aiming to boost its profitability by using to the fullest extent its low-cost integrated platforms and further restructuring its other factories. It will expand its capabilities in China in order to supply its downstream operations in the country. It will also further develop a project to build a new low-cost plat- form in Russia. Containers

The Containers Division is a front-ranking international player in all three of its business lines. These comprise: Bottles manufactured by Saint-Gobain Emballage and decorated by Saga Décor * Source: Saint-Gobain.

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2003 Management report Glass

The third Containers business line, plastic pump dis- As most markets have tended to become more difficult, pensers, manufactures a core catalogue of products for the Division’s sales growth (based on constant exchange global markets and has production facilities in Europe, the rates) is attributable to its policy of focusing on quality and United States, Latin America and China. As in its other core seeking customer satisfaction, with comprehensive sales businesses, the Division enjoys a strong reputation for the offerings that are constantly being expanded and leading- quality and performance of its products as well as for its edge industrial capabilities. process controls and quality assurance standards. Although the Division’s 2003 operating income was hard In each of the Division’s packaging businesses, the strate- hit by rising energy prices, notably natural gas in the gic focus is on ever-enhancing product and service quality United States, it contracted by only 1.9% based on constant to respond swiftly to client needs and expectations. exchange rates, compared to a historically high 2002 fig- ure. This solid performance was the result of continuing Operations in 2003 productivity drives in each company, and of the payoff from the streamlining measures undertaken in Bottles Contribution to the Group 2003 2002 2001 and Jars in the United States and Spain and by Calmar in 13% 13% 13% % of net sales Europe. % of operating income 18% 19% 15% % of cash flow from operations 20% 21% 18% Cash flow remains at the high level of €504 million, the decrease from the €556 million recorded in 2002 being Key consolidated data essentially due to unfavorable exchange-rate effects. (in millions of euros) 2003 2002 2001 Net sales 3,869 4,076 4,070 Outlook for 2004 Operating income 442 479 404 Cash flow from operations 504 556 499 Despite continuing economic uncertainty in the regions Capital expenditure 265 294 237 where it is based, the Division is aiming – barring any major incident, particularly with regard to energy prices Internal sales are deducted from sales data by Sector and by Division. and exchange rates – to keep up its moderate growth,with high-level performance. It is also reviewing certain devel- The Division’s net sales contracted 5.1% compared to 2002. opment opportunities in emerging countries. There was no material change in the scope of consolida- tion, but unfavorable exchange-rate effects had a strong impact, canceling out 2.7% sales growth on a constant exchange-rate basis. The main currencies involved were the U.S. dollar and the Brazilian real.

In Bottles and Jars, Europe recorded slow growth overall, although market conditions were more buoyant in Southern Europe.

In the United States, the Bottles and Jars business made strong gains compared to 2002, based on constant exchange rates. Growth was also satisfactory in Latin America, in spite of the economic and monetary turmoil that has wracked the region.

Sales from Flasks were practically level with 2002, as demand from the pharmaceutical industry weakened.

Lastly, the plastic pumps business made major strides (excluding exchange-rate effects), posting a strong per- Burberry’s “Brit” Eau de Toilette formance, especially in Europe.

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High-Performance Materials

Ceramics & Plastics

In 2003 – as in 2002 – the Ceramics & Plastics Division continued to be organized along the same lines as the Abrasives Division within the High-Performing Materials Sector, in a bid to strengthen synergies – particularly in the area of research and innovation.

The Ceramics & Plastics Division currently breaks down into four business lines: Ceramic Pellets and Powders; Ceramic Products; High-performance Plastics; and Crystals, which features a specific organization structure to cater to the segment’s growth potential. This overall structure is built around Saint-Gobain’s core businesses of Ceramics and Refractories, as well as around the core busi- nesses of Norton, Furon and Chemfab, Holz and Magic, acquired in 1990, 1999 and 2000 respectively. No major acquisitions were made in 2003, except for the purchase of a majority interest in SGTM, a Japan-based fused-cast refractories company. Silicon tubes for the pharmaceutical industry

Through these global business lines the Division gener- ates 36% of sales in Europe, 52% in North America, 4% in South America and 8% in the Asia-Pacific region. ropolymers, silicons and thermo-setted plastics, that meet stringent requirements of purity, precision forming and Ceramic Pellets and Powders are used for abrasives, refrac- resistance to corrosion or high temperatures. It enjoys tories, ceramics and products for catalyst carrying in the high growth and profitability, and is structured around petrochemicals industry. In 2003, this business line four core product families: stepped up its plan to sharpen its competitive edge, pri- ■ advanced Films and Fabrics, which covers films, adhesive marily by setting up operations in countries with low pro- tapes and special fabrics for aeronautic, electrical , archi- duction costs. The Division turned in satisfactory profits tectural and safety applications; during the year. ■ specialty Elastomers, which supplies flexible foams for sealing and vibration-proof foams for cars, manufactur- Ceramic Products covers the manufacturing of materials ing and the building industry; and parts which draw upon the thermal and mechanical ■ fluid Systems, including pipes, couplings and tubes for properties of both traditional and advanced ceramics manufacturing, automotive, food processing, pharmaceu- (resistance to very high temperatures, to abrasion and to ticals, chemicals and semiconductors; corrosion). In 2003, the business line experienced flat ■ precision Bearing and Rings, which manufactures self- demand for refractories and fused-cast ceramics, while lubricating bearings and rings for cars, home appliances, recording improved performance for fine and structural machine tools and airplanes, along with composite parts ceramics. for the aeronautics industry. High-Performance plastics lifted earnings despite overall The High-Performance Plastics business line processes slack manufacturing demand, on the back of restructur- engineered polymers and elastomers, particularly fluo- ing programs that were continued throughout the year.

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2003 Management report

Crystals are produced for the medical, nuclear, safety, oil and petrochemical markets. The business line’s structure was heavily retooled in 2003 to enable it to meet demand generated by these markets’ strong growth potential. All products geared to the semiconductor industry were hit by weak demand and low prices. There were, however, slight signs of an upturn towards the end of the year.

Following ten years of acquisitions, the Division is now focused on organic growth.

As in 2002, restructuring and integration processes were rolled out during the year, with a view to further enhanc- ing the Division’s competitive advantage.The focus for the future will be on strengthening its presence in countries with low production costs, as well as selectively undertak- ing research and development programs that are tailored to its businesses. Abrasive disks

Overall, the Division’s strategy is rooted in speeding up organic growth with a view to becoming number one or ing in the paper industry. Most of the products in this number two in the bulk of its businesses. It also intends to business segment are made to measure. strengthen its reach in Asia – particularly in China and Japan – primarily through partnering major customers. ■ Thin grinding wheels are formed from bonded abrasives The Division has also continued to seek out operating syn- which have been reinforced with fiberglass mesh. These ergies and enhance asset turnover. products are standardized and their production is the most heavily automated. End-use markets include build- The Abrasives Division, which was originally acquired as ing and home improvement and industrial users. part of Norton in 1990, has steadily built up a world lead- ership position* thanks to organic and external expansion ■ Coated abrasives are made of abrasive granules which both in Europe and the United States. are coated with a layer of adhesive and affixed to paper, cloth fiber or synthetic backing. They are sold in strips, The Division’s unparalleled product coverage makes it the discs, rolls or sheets and are used for a wide range of appli- only supplier capable of offering customers a comprehen- cations such as polishing reactor turbine rotor blades or sive range of finishing system solutions, from roughing in surface finishing for industry and the home. Coated and surface finishing through to polishing, cutting and abrasives range in size from the equivalent of a small coin precision grinding. Its extensive experience enables it to up to sheets several meters wide. provide solutions for each stage in the process in terms of both products and technical know-how. ■ Superabrasive grinding wheels and tools combine a grinding surface made from diamond or cubic boron The Division is also the only global manufacturer with nitride with a resin or metal bonding system. Their per- capabilities in all types of abrasives using mineral granules formance in demanding, high-precision grinding jobs and made of aluminum oxide, silicon carbide or diamonds. their long-lasting reliability make them indispensable for a wide array of sectors, such as auto manufacturing and ■ Grinding wheels incorporate natural or synthetic abra- aeronautics, as well as construction. In certain electronics sives which have been bonded with a vitrified or organic applications they can approach nanometer-level precision. binder.Their size can vary from the miniature wheels used by lapidaries through to 12-tonne wheels for wood pulp- The Division operates manufacturing facilities in some thirty countries and has built up an extensive presence in Asia and * Source: Saint-Gobain. South America alongside its established operations through-

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High-Performance Materials

out Europe and the United States.To meet demand in its var- The restructuring of Saint-Gobain Céramiques Avancées ious markets and satisfy a broad spectrum of customer Desmarquest, which discontinued its medical products requirements, it markets custom solutions directly to indus- business, should allow the specialty ceramics line to trial clients and supplies large-run products to distributors focus on markets where the Division holds or is building who serve the trade and mass market. The Division has also a leadership position. Industrial ceramics recorded a made significant investments in e-business tools in order to slight improvement in operating income thanks to an deliver optimal levels of customer service. upturn in repairs of glassmaking furnaces. The particu- lates filters factory in Courtenay, France, operated as a Operations in 2003 joint venture with the Japanese group Ibiden, has reached full capacity and supplies all silicon carbide- Contribution to the Group 2003 2002 2001 based filters installed on PSA Peugeot-Citroën diesel 11% 12% 13% % of net sales engines. A second production line will come on stream in 11% 9% 15% % of operating income the summer of 2004. % of cash flow from operations 12% 9% 12% The High-Performance Plastics business grew its operating Key consolidated data income despite sales remaining stable in the food and (in millions of euros) 2003 2002 2001 automotive industries. To adapt to changes in these mar- 3,256 3,637 4,018 Net sales kets, the Division closed two manufacturing sites in north- 273 244 392 Operating income eastern United States and is continuing its aggressive Cash flow from operations 291 246 330 drive to streamline production at the remaining sites. It Capital expenditure 108 160 173 has expanded its presence in the still-growing healthcare Internal sales are deducted from sales data by Sector and by Division. market. In Research and Development, the pooling of teams in Northboro in the United States is now fully com- Sales of the High-Performance Materials Sector as a whole pleted and operational, and this center has been substan- declined significantly in euro terms in 2003 because of tially expanded.The new R&D center at Cavaillon,in south- unfavorable dollar-to-euro exchange rates, which impact eastern France, also opened its doors in 2003, following 50% of the Sector’s operations. capital expenditure of €15 million. With these two research centers, maintaining close contacts with the Operating income, on the other hand, rose substantially to Abrasives center in Worcester, the Division now has a con- €273 million from €244 million, thanks to restructuring sistent high-level structure in which to imagine, develop efforts begun in 2002, which continued in 2003. and market the ceramics and plastics of the future.

Although markets for grinding and finishing products In the course of 2003, ceramics operations serving the remained tense in 2003, the Ceramic Pellets and Powders semiconductors market were brought together with crys- business line enjoyed a good year.Volumes dipped slightly, tals operations for diagnostic imaging or microlithogra- but profitability and the return on investment advanced phy. This year was the lowest ebb in the cyclical semicon- significantly. ductor business and the Division’s results reflect this. Large-scale restructuring was launched, especially in the In 2003, the Division further implemented its plans for United States, which should enable this business to turn industrial streamlining and geographical and technical around once the market becomes favorable again. development. There has been extensive capacity-building capital expenditure in the field of pellets for fracturing gas Sales of the Abrasives Division declined compared to 2002 deposits and in fine silicon carbide powders used in pollu- because of negative exchange-rate effects and the dis- tion-abatement filters for diesel engines. These invest- posal on January 1, 2003 of its Stone business. Based on a ments do not only serve the expansion of these business comparable structure and constant exchange rates, sales lines, but also allow the marketing of new products that inched up 0.6%. come from the work of the R&D departments. The backdrop for these results was a depressed industrial In Ceramics Products, all markets suffered in 2003 as a environment, with contraction in the markets served by result of industrial activity remaining in the doldrums. the Division in Europe and the United States, due to

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2003 High-Performance Management report Materials

sluggish growth trends in these economies and to reloca- Lastly, Saint-Gobain Abrasives also finalized in 2003 the tion of many industrial operations in countries with low sale of its Stone business to Wheelabrator Allevard, in labor costs. order to be able to further develop in the businesses where it enjoys a leadership position. Saint-Gobain Abrasives successfully expanded its product distribution, making applied abrasives, thin grinding wheels and diamond-tipped tools available at major Outlook for 2004 retailers and in automotive supply stores in Europe and North America, by designing new products and ensuring Based on a forecast of slight expansion in its markets in high-quality service. 2004, particularly in semiconductors, the Ceramics & Plastics Division is aiming for volume growth, backed by Performance was more mixed in industrial markets. the launch of new products from its R&D programs in all Significant growth in applied abrasives for wood and par- of its business lines.The Division’s operating margin is also ticle panels, in bonded and applied abrasives for the expected to rise again. The drive to optimize its industrial foundry industry and in vitrified grinding wheels for fin- capabilities will continue in 2004, and there will be sub- ishing ball bearings offset more lackluster performance in stantial capital expenditure to follow up on the develop- products for the aeronautics and automotive markets, ment of certain key markets, particularly in Asia. Research which shrank in 2002. and development efforts will focus on a few major projects for which there are large growth prospects. Sales in Asia rose at a very satisfactory pace, both in the Northeast (China and South Korea, mainly) and in For the Abrasives Division, assuming stable market condi- Southeast Asia (Vietnam, Philippines, Singapore, tions, priorities for 2004 will be growing retail sales, main- Malaysia).These vigorous results were mostly attributable taining strong positions in industrial markets and driving to a strategy based on penetrating these markets through sales growth in Eastern Europe and Asia. On the manufac- a few specific areas, and to the quality of the products turing front, the focus will be on further enhancing com- coming out of the Saint-Gobain Abrasives plants in China petitiveness and optimizing industrial capabilities, to gen- and Indonesia. erate productivity gains and faster asset rotation.

Saint-Gobain Abrasives continued to implement its strat- For the High-Performance Materials Sector as a whole,cur- egy of building its leadership in thin grinding wheels, by rency trends, especially concerning the U.S. dollar, are a further automating its factories that have high labor costs source of uncertainty in results forecasts for 2004. and transferring products with low added value to low- labor-cost plants, mainly in China. The Division also acquired Rasta at the end of 2003.

Strong marketing performances and substantial produc- tivity gains, achieved thanks to capital expenditure on automating industrial processes in recent years, have led to higher sales and have boosted the Division’s operating income, more than offsetting cost inflation. Major restruc- turing operations have been undertaken in Europe and North America to raise the price competitiveness of Saint- Gobain Abrasives.

Capacity-building investment in low-labor-cost countries was maintained, as was capital expenditure on automat- ing processes in countries with high labor costs. Information systems were also upgraded, to allow Saint- Gobain Abrasives to fully benefit from its worldwide scope Multi-Air® process for air and dust suction and from the complementary strengths of its facilities.

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Housing Products

(in millions of euros) 2003 2002 2001 cialists. For example, Point.P Matériaux de Construction is Net sales 15,362 15,102 14,824 geared to domestic consumers, whereas Cedeo, Dupont Operating income 976 1 004 915 Sanitaire Chauffage and Sem Angles are targeted at Cash flow from operations 714 814 768 plumbing, heating and air conditioning specialists, SFIC is Capital expenditure 380 401 429 focused on insulation professionals, Asturienne is intended for roofing specialists, and Point.P Travaux Internal sales are deducted from sales data by Sector and by Division. Publics is channeled to the public works market. Point.P and its various brands cover the whole of France, meeting Building Materials Distribution customer needs in the construction and renovation mar- kets. This brand has now been rolled out to Spain. The Building Materials Distribution Division is the leading distributor of building materials in Europe and the top dis- Lapeyre is a specialist in home decoration, covering four tributor of ceramic tiles worldwide*. It serves the home essential product “destinations”: fitted kitchens, fitted building, renovation and interior decoration markets. bathrooms, interior carpentry and exterior carpentry. Its Customers include building contractors, tradesmen and offerings are closely tailored to the domestic consumer architects, as well as home owners. market. Lapeyre has an extensive presence in France, and also has operations in Belgium and Switzerland. The com- Ever since it was founded in 1996, the Division has enjoyed pany’s operating presence in São Paulo, Brazil through strong growth, combining organic and external expan- Telhanorte, has given an additional boost to its interna- sion. It first began to develop in France through Point.P tional development. Lapeyre and its related brands have a and Lapeyre, then in the United Kingdom through Jewson network of 300 stores with sales surface areas ranging and Graham, and subsequently in Germany, the from 50 sq.m. to 4,000 sq.m. in order to tailor the offering Netherlands and Eastern Europe, through Raab Karcher. to local customers.

An unrivalled sales network in Europe In the United Kingdom, the Division operates through a network of over 670 outlets, split between general and With over 2,800 outlets in 14 countries, the Building specialized retailers. Its two main banners are Jewson, Materials Distribution Division boasts an unrivalled distri- which is Britain’s biggest building materials merchant, bution network within Europe. Its success is due to the and Graham, a specialist in plumbing and heating. Both diversity and strategic fit of its brands.Each of these has its are firmly focused on providing proactive local service to own specific features and market position, whether small contractors and tradespeople. They are currently geared to trade specialists or the domestic consumer mar- strengthening their market position through bolt-on ket, contributing to the sales strength of the network as a acquisitions and by honing their sales and marketing whole while meeting the needs of local markets. This techniques. proactive organization structure means that the Division can offer clients a full array of customized solutions, meet- Raab Karcher is the leading building materials distributor ing their diverse needs in terms of products, services and for trade customers in Germany, the Netherlands, style trends. Hungary and the Czech Republic.This brand has also been rolled out to Poland. Raab Karcher manages some 400 Strong brands with an excellent strategic fit sales outlets and holds a leadership position in the German market as a distributor of ceramic tiles. Point.P,which is the market leader in France, is targeted at building professionals and modeled on the cash and carry La Plateforme du Bâtiment – a distribution concept principle. It has a network of over 1,400 outlets structured launched by the Building Materials Distribution Division around brands for the general public and for trade spe- in France in 1998 – is geared to helping small contractors and tradespeople “save time and money”, thus enabling * Source: Saint-Gobain. them to meet ever tighter deadlines. La Plateforme du

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Bâtiment is a sales outlet dedicated exclusively to all trade specialists. Based on the cash & carry principle, it offers a specific range of products tailored to the seven main busi- ness areas of the construction industry, whose supply and net prices are guaranteed all year round. It offers, under one and the same roof, a comprehensive range of advisory and additional services. Operating in each major French city, La Plateforme has proven extremely successful. Building on this success, the same business model has been rolled out internationally, adapted to each different country and local market. La Plateforme now counts over thirty sales outlets and has operations in seven countries – including the United Kingdom, Hungary, Spain, Mexico and Brazil – and aims to further its expansion drive.

Sharing know-how to strengthen each banner

The Building Materials Distribution Division seeks to pro- World leader in tile distribution mote useful synergies among its banners through the pooling of know-how, while ensuring that it preserves the distinctive character of each one. The Division has set up cross-functional departments, harmonized product Sales based on a comparable structure and constant ranges, rolled out innovative sales concepts and new serv- exchange rates were up 2.5% compared to 2002. ices to the entire network, generated synergies in logistics, developed partnerships with the best suppliers, set up a The Division’s external growth continued at a rapid pace, common information technology platform and provided with 38 acquisitions that contributed full-year sales of for transfers of staff among the various entities. €993 million and brought 271 sales outlets into the net- Leveraging the power of its network and the nimbleness of work. Newly acquired companies accounted for €496 mil- its teams within each banner, the Building Materials lion of 2003 sales, and the disposal in 2002 of part of the Distribution Division intends to continue to expand in distribution network for melamine-coated products in the Europe and beyond. United States caused a €94 million decrease in sales.Thus the net effect of changes in scope on 2003 sales was €402 million, or 3.7% growth. Operations in 2003 On the other hand, the strengthening of the euro had a Contribution to the Group 2003 2002 2001 negative impact on the translation of sales of companies % of net sales 38% 36% 33% outside the euro zone.Total sales of the Division amounted € € % of operating income 23% 21% 18% to 11,305 million, up 3.2% from the 10,953 million % of cash flow from operations 16% 15% 12% achieved in 2002.

Key consolidated data In France, where the Division generates more than 50% of (in millions of euros) 2003 2002 2001 2001 its sales, the renovation and home improvement market pro forma again experienced a small year-on-year contraction in vol- Net sales 11,305 10,953 10,521 10,061 ume. In new construction, housing starts of individual Operating income 560 534 475 490 houses grew by a slight 0.3%. These two markets are Cash flow from operations 398 414 321 339 mostly served by tradespeople and small and medium- Capital expenditure 213 227 252 247 sized companies, the key clienteles for Point.P and La

Internal sales are deducted from sales data by Sector and by Division. Plateforme. Conversely, the number of housing starts in collective housing jumped 10.5% between end-2002 and Pro forma data for 2001 include Pipe distribution operations to reflect their transfer to the Building Materials Distribution Division. end-2003.

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Overall, in a market in which volumes traded were practi- Karcher also acquired the distribution subsidiary of the cally unchanged, sales of the Division’s French businesses Heijmans construction group, which generated full-year again grew based on a comparable structure. Driving this sales of €12 million, half of this in kitchen, plumbing and growth were expanded product and service offerings for tiling products. all customer categories, as well as the opening of four new Plateforme and three "Lapeyre, la Maison" sales outlets. In Spain, Point.P rounded out the customer base of its 19 outlets in Catalonia with two acquisitions that represent Adding to this organic growth were sales of €260 million €16 million in sales. It also opened two new Plateforme from 21 acquisitions (which represent full-year sales of outlets in Barcelona, following the Madrid opening in €632 million and contributed 208 sales outlets).Two large- 2002. scale acquisitions took place at the end of 2003 and there- fore did not contribute to 2003 results. The first, Dubois In Eastern Europe, sales were satisfactory in the Czech Matériaux, had 2003 sales of €211 million from 17 sales Republic and Hungary but weak in Poland, despite a good outlets specialized in wood, panels, carpentry and interior start for the two Plateforme outlets in Warsaw and design. The second, PUM Plastiques, is a specialized dis- Katowice and a return to growth for OKFENS which pro- tributor of plastic products for the drinking water and duces PVC windows and fittings. wastewater markets,which had 2003 sales of €234 million and brings a network of 127 outlets, including 14 in Poland, Outside Europe, Lapeyre vigorously developed Telhanorte Spain and Belgium. in Brazil, opening two new outlets in the suburbs of São- Paulo, bringing to 16 the number of stores in its regional In the United Kingdom, where its market remains buoy- network. A Plateforme concept, called Telhanorte Pro, was ant, Saint-Gobain Building Distribution consolidated its also launched successfully. In Mexico City, two additional positions and recorded sales growth based on a compara- Plateforme outlets were set up, following the first one in ble structure and constant exchange rates, partly thanks 2002. to the opening of 3 new Plateforme outlets and 30 Graham stores for plumbing and heating products. Small bolt-on Despite a lackluster environment and the cost of stepping acquisitions also took place, to strengthen Jewson’s gen- up the creation of new outlets, the Division’s operating eral building materials merchant network and develop income rose to €560 million from €534 million in 2002, specialized distribution operations, in plumbing and heat- bringing operating margin to 5% versus 4.9% in 2002. ing, wood and tiling. Twelve companies were acquired in 2003, representing full-year sales of €234 million and bringing 41 sales outlets. The actual contribution of new acquisitions to 2003 sales was €148 million. However, the negative pound-to-euro currency impact was a €261 mil- lion reduction in sales.

In Germany, where the building industry is still very depressed, the Division further streamlined its network by bringing specialized distribution operation in tiling and piping under the Raab Karcher banner. It also strength- ened its position in trading of roofing and insulation prod- ucts, through two acquisitions that brought 19 outlets and €99 million in sales.

In the Netherlands, the construction market abruptly deteriorated in 2003, particularly for new construction. Raab Karcher, the Division’s main company in this market, weathered this difficult environment by opening three new exhibition rooms for product recommenders and French market leader in Building materials Distribution architects, under the heading of "Inspiration". Raab

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Outlook for 2004

In 2004, based on the expectation that the European building industry should be experiencing a cyclical upturn, except perhaps in Germany and the Netherlands, the Division is aiming for further like-for-like sales growth. The growth drivers will be the momentum generated by the banner networks, synergies among the companies of the Division and the opening of new outlets at an acceler- ated pace,in addition to the full impact of the acquisitions carried out in 2003.

Building Materials External thermal insulation

The Building Materials Division is one of the world leaders* based business, as this material is particularly suited to the in its market and has strong leadership positions in the country’s traditional rustic-style housing market. United States, Europe and Latin America. Industrial concrete, a France-based business operated by The Division provides complete offerings for the outside of Saint-Gobain Stradal, manufactures concrete products the home, in both construction and renovation segments: used in road construction and utilities, as well as in civil vinyl and cement products for wall facings and sidings on engineering projects (railway ties, arch stones, supports). individual homes in the United States; roofing materials; Over the year, this business line continued to actively concrete products for roadworks and utilities; mortars for branch out into urban furniture, floor slabs and paving wall facings and glues for tiles. stones, gardening and landscaping items.

The Division’s global presence does not preclude a strong The Division’s main strategic goals are bolstering its posi- local dimension in products and solutions that cater to tioning in core market segments and sub-segments, such local preferences while serving the traditional needs of the as the United States, Central Europe and Brazil, while building industry. In each market and region, homes have speeding up expansion into new markets in China and specific architectural features – for example, wall facings Eastern Europe. and coating vary from one country to another in Europe, while windows are different in many regions of the United Operations in 2003 States. More than half of the Division’s sales are gener- ated in the Americas, yet its vast product offerings are Contribution to the Group 2003 2002 2001 available in twenty-three countries. % of net sales 9% 10% 10% % of operating income 11% 13% 11% CertainTeed spearheads the mainly U.S.-based operations % of cash flow from operations 7% 9% 11% of PVC products for wall facings and outdoor design of the home (sidings, windows, gutters, railings and fittings for Principales données consolidées terraces) and roofing materials (asphalt shingles). (in millions of euros) 2003 2002 2001 Net sales 2,824 3,074 3,184 Saint-Gobain Weber, the world leader in tiling adhesives Operating income 265 335 294 and seals*, heads the Division’s global mortars business Cash flow from operations 172 247* 297 and is actively expanding its geographic reach. It is the Capital expenditure 117 135 134 European leader in wall facings* and the market leader in

Europe and Brazil for industrial mortars*. * After a pre-tax charge of €100 million concerning asbestos-related claims.. Internal sales are deducted from sales data by Sector and by Division. The Group’s subsidiary,Brasilit,ranks number one in Brazil’s roofing products market*. Fiber cement roofing products, strengthened by plastic threads, are primarily a Brazil- * Source: Saint-Gobain.

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Based on a comparable structure and excluding It also maintained its innovation drive and designed fiber exchange-rate impacts, the Division’s sales rose 4.9%, fol- cement products reinforced with polypropylene fibers, lowing a strong 2002. U.S. operations were the main con- produced in Brazil. The manufacturing of PVC windows is tributors to this favorable trend, as they enjoyed both ris- developing in the United States, and work began on a new ing volumes and higher prices compared to 2002. The factory in Indiana in the second half of 2003. Mortars business also made progress, mostly in Southern Europe, Central Europe and the United Kingdom. Outlook for 2004

Based on an actual structure and with exchange-rate For 2004, the outlook remains favorable for the U.S. build- impacts, however, sales contracted 8.1% due to unfavorable ing industry, and in Europe markets now seem to have sta- trends for the U.S. dollar and Brazilian real, and to the dis- bilized. Prices of raw materials are also expected to remain posal of CertainTeed Ventilation in the United States and of stable at or near their current levels. the Terreal group in France, which took place at the end of March 2003 and the end of October 2003, respectively. The Division should nevertheless be able to make headway in volume in most of its businesses, drawing the benefits Operating income, based on constant exchange rates and of its continuing productivity gains and of its products’ a comparable structure, declined by 10.5% compared to strong positioning. It will continue its policy of prudent 2002, as a result of substantial increases in the cost of capital expenditure and control over working capital. asphalt, PVC resin and natural gas in the United States, which could only partly be passed on to sale prices. Based on an actual structure, operating income fell 20.9% com- Pipe pared to 2002. The Pipe Division has operated in the water-supply indus- The Division contributed to reducing Group debt through try for over a century, providing comprehensive expert its two major disposals, as well as by reducing its working solutions that meet the highest possible demands. capital and keeping tight control over its capital expendi- ture and free cash flow. It focuses on designing and selling: ■ complete systems of ductile cast iron pipes for drinking water, irrigation, purification and rainwater drainage. ■ pipe systems for industrial general circuits, including pressurized water, waste water and cooling systems; ■ pipe systems for fire prevention (pipes, couplings, valves and stand pipes); ■ full ranges of valves, sprinklers, and connectors for water and purification systems, as well as fire prevention and irrigation devices; ■ complete cast-iron pipe systems for the building indus- try (waste water and rainwater drainage); ■ roadworks components made of ductile cast iron and steel for accessing pipe systems.

With a view to ensuring a local footprint, the Pipe Division is structured internationally into three business lines: Water and Purification, Roadworks and Utilities, and Construction.

By drawing on new product ranges and constantly seeking out technical improvements, the Pipe Division can cater to changes in the water market, as well as to new needs of local government agencies, and position itself within new New Prestige line of ornamental fencing market segments. The pipe systems sold by the Division

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enjoy a worldwide reputation for superior quality and cut- ting-edge technology, thanks to their strength, excellent compliance with public health and environmental requirements, and endurance which reduces network maintenance costs.

The Pipe Division is the world’s leading producer and exporter of ductile cast-iron pipe systems and supplies for roadworks and utilities*. It also holds the top slot in Europe* for cast-iron waste water drainage systems.

In the international Pipe system market,players face competi- tion not only from other manufacturers of cast-iron products, but also from other materials such as plastics, steel, concrete and sandstone. The Division has responded to this challenge by setting itself apart from its rivals in terms of product qual- ity, customer service and providing a diverse offering.

The Pipe Division has operations in around one hundred Checking the settings while loading countries,representing all of the world’s major markets. Its large-diameter pipes historic markets, which encompass France, Germany, Spain, the United Kingdom, Italy and Brazil, have recently been rounded out by new capacity in Colombia, China, South Africa and the Czech Republic. 2003 was a good year for the Pipe Division. Sales jumped 12.8% and operating income surged by 11.9%,mainly thanks Sales and marketing efforts are carried out within each of to execution throughout the year of the Abu Dhabi con- the Division’s manufacturing companies, as well as tract – the largest ever signed by the Division – and of other through sales subsidiaries in Portugal, Belgium, the large-scale Distant Export contracts, notably in the Netherlands, the Czech Republic, Poland, Norway, Finland, Dominican Republic. Greece, Austria, Ireland, Argentina, Chile, Peru, the West Indies and Hong Kong. A major sales force network and However, the year also saw a sharp rise in the cost of the sales delegations located within reach of the Division’s main raw materials used by the Division, which weighed main export markets complete the line up. down production costs. This explains why, in spite of rapid sales growth, operating margin did not exceed the 2002 Operations in 2003 level of 10%.

Contribution to the Group 2003 2002 2001 In Europe, the Division’s sales were on a par with those of % of net sales 5% 4% 6% 2002 based on actual exchange rates, but rose based on % of operating income 6% 5% 5% constant exchange rates. This slight growth, following two % of cash flow from operations 6% 6% 5% years of contraction, was the result of solid sales in France, a sharp upturn in demand in Italy where expenditure on Key consolidated data public-works programs has resumed, and further develop- (in millions of euros) 2003 2002 2001 2001 ment in the Division’s Eastern European markets. The pro forma British and Spanish markets remained on the same level as Net sales 1,516 1,344 1,397 1,782 in 2002, which in the case of Spain was high. However, the 151 135 146 131 Operating income Division’s sales were hampered by a further decline in the 144 153 150 132 Cash flow from operations German construction and public-works market, even Capital expenditure 50 39 43 48 though there were signs of a bottoming-out towards the

Pro forma data for 2001 exclude Pipe distribution operations to reflect their transfer to the Building Materials Distribution Division. * Source: Saint-Gobain.

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end of the year, and by an abrupt slowdown in sales in provide a new competitive source for supplying connectors Portugal. Sale prices rose only slowly, and price concessions within the Division. Lastly, the Division has continued its had to be made for some products and in some markets. efforts to align all factories’ technical performance with its best practices, as a way of not only lowering production In all European markets, the Division continued in 2003 to cost,but also stimulating product innovation and standing pursue its strategy based on innovation and sales differen- out from the competition. tiation. It developed new product lines, including the new range for gravity-based wastewater networks and the new Overall, exceptional volumes in Distant Exports and pro- Irrigal pipe developed for the Spanish irrigation market. ductivity gains more than offset the impact of higher raw The Natural range, which has become the high-end stan- materials prices. dard for European drinking water networks, was further deployed with launches in Spain and Germany.The Utilities Capital expenditure was on an upward trend, essentially in and Valves product ranges were also renewed and new China, Brazil and the Czech Republic. models were developed in the field of connectors and for the building industry. Outlook for 2004 In Brazil, sales continued to decline against the backdrop of a strict policy to control government spending. In China, The outlook for 2004 is less favorable for the Division, conversely, rapid sales growth continued apace, buoyed by owing to a number of uncertainties, concerning business fast market growth,but also by market share gains that fol- volumes in Distant Exports after deliveries under the Abu lowed the commissioning of the Division’s new capabili- Dhabi contract draw to a close in the first quarter; con- ties, especially the new Xuzhou plant. cerning raw materials price trends, with a strong likeli- hood of continuing imbalances in world demand, In Distant Export markets, deliveries under the exceptional because of high demand from China to fuel its economic Abu Dhabi contracts and the substantial Dominican growth; and concerning trends in the value of the dollar. Republic contract helped make 2003 a record-breaking year A decrease in the value of the dollar would have a favor- for the Division. Deliveries for these contracts took place able effect on the cost of most raw materials, which are smoothly, and allowed the Division to demonstrate its spe- more or less correlated with the dollar, but would under- cific expertise in managing this type of contract.The sharp mine profitability of Distant Exports business, even drop in the value of the dollar over the year had only a lim- though the Division strives to minimize such impacts ited impact thanks to the currency hedges which the through the geographic diversity of its production sites Division had set up. and the variety of its sourcing.

In manufacturing, steps to boost productivity continued in To face these uncertainties, the Division can draw upon 2003. At the end of 2003, the Division closed its centrifuge key strengths, namely its powerful presence in Europe, unit for building industry products in Liverdun (France), to reinforced by its policy of innovation and product differ- optimize the use of available capacity. In connectors, the entiation; the growth potential in drinking water supply development of products manufactured in Brazil and the markets, in which unmet needs remain huge, or in waste- Czech Republic helped boost competitiveness. Work also water treatment markets, where the Division holds a began in 2003 on a new foundry in China, which should weaker share than do other materials; and the develop- come on stream in 2004, to serve the vast local market and ment of its presence in China, a fast-growing market.

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(In millions of euros) 2003 2002 2001 technology and communications (such as printed circuit R & D expenditure 306 312 320 manufacturing equipment or substrates for flat-screen dis- plays), optoelectronics, lighting through semiconductive Saint-Gobain has constantly been at the forefront of techno- diodes and more. logical change in all of its businesses. In a rapidly changing global competitive environment, maintaining a worldwide Thirdly, to enable the entire Group to benefit from the com- leadership position increasingly requires a technological edge plementary expertise developed on a wide range of materials: in all fields, as well as a process of ongoing innovation. Glass,Ceramics,Plastics,Metals,Cements and Mortars.Toward this end, a substantial part of research operations on ceram- The Group’s global R&D organization works towards three ics, polymers and abrasives was brought together in goals.The first of these is to develop a steady stream of innova- Northboro in 2003. tion for Saint-Gobain’s historic industrial businesses. In this area, initiatives are focused on designing processes to meet The breadth and depth of expertise in each of Saint-Gobain’s ever-changing standards of efficiency, quality, reliability and product groups opens the door to unique combinations,yield- environmental compliance and on developing high-function- ing unrivalled capabilities and performance. ality, high-value products that respond to emerging needs in the Group’s markets. The self-cleaning glass that has recently The Group’s 16 principal R&D centers in Europe and the been brought to market reflects this aim. Saint-Gobain and its United States are responsible for pursuing an ambitious pro- researchers have received a number of awards for this product, gram of research initiatives and are supported in their efforts including the Chéreau-Lavet award in France. Other examples by around 100 smaller-sized development units, which are include new products for the automotive industry, such as spread across the world, wherever the Group has manufac- windshields in ever-more-complex shapes and with sunproof- turing operations. ing built in,and even an electrochrome glass roof offering vari- able transparency,or new cement-reinforcing fibers for roofing At the core of R&D processes, several sites play a key coordi- products in the Brazilian building materials market. nating role: ■ Aubervilliers (France) includes SGR, the Group’s largest Its second task is to create products that meet demands in research center on Glass, an R&D unit specialized in Building high-growth markets and allow Saint-Gobain to bring its Materials, and a glass-furnace design unit. expertise to bear in ensuring their commercial development. ■ Cavaillon (France) which is a center of excellence for New products have been designed in the field of environ- Ceramics research in Europe. mental applications, water transportation and treatment, ■ The sites of Northboro and Worcester in Massachusetts renewable energy (particularly solar and wind energy), filter- bring together a key section of research in Ceramics,polymers ing of particulate emissions from diesel engines, information and Abrasives.

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Research: a key growth driver

The table below summarizes the Group's R&D centers and their capabilities.

Saint-Gobain Recherche (SGR) All Glass divisions Aubervilliers (France) Centre de Recherche et d’Etudes Européen Ceramics Cavaillon (France) (European Research & Engineering Center) Northboro R&D Center Ceramics, Plastics and Abrasives Northboro (United States) R&D Center Abrasives Worcester (United States) Solon Development Center Crystals and Detectors Solon (United States) Centre de Développement Industriel Flat Glass Thourotte (France) Sekurit Saint-Gobain (ZAF) Flat Glass Herzogenrath (Germany) Centro de Investigacion y Desarrollo Flat Glass Avilés (Spain) Centre Recherche/Développement (CRIR) Insulation Rantigny (France) Technology Center Insulation/Building Materials Blue Bell (United States) Vetrotex R&D Center Reinforcements Chambéry (France) Development Center of Wichita Falls Reinforcements Wichita Falls (United States) Process & Product Development Pipe Pont-à-Mousson (France) Chalon Technical Center Containers Chalon sur Saône (France) Vinyl Siding & Windows Building Materials Jackson (United States) Bayex Development Center Technical Fabrics Saint Catharines (Canada)

Saint-Gobain's R&D community represents a highly inter- Researchers are strongly encouraged to move between active and mobile group of individuals. R&D and other Group operations, as well as to pursue The various communication and knowledge-sharing cross-business line and international experience. Such forums made available to researchers enable them to pool exchanges not only enrich the Group, but also help to talents, cross-fertilize and innovate together. Saint-Gobain empower and provide incentives for staff members. has forged partnerships with leading university research R&D operations play a central role in the growth of all laboratories, particularly in Europe and North America. In Saint-Gobain Group business lines.The Group's nearly 250 France, it has set up two mixed research centers in con- new patent applications filed in 2003, in addition to 2,500 junction with CNRS, France's national research council. applications for international extension, reflect its ongo- The center in Aubervilliers (north of Paris) studies glass ing design of new products offering constantly upgraded surfaces and their interfaces and the second, currently performance. Saint-Gobain's R&D organization brings being set up in Cavaillon (south-eastern France), will focus original solutions to rapidly-changing markets and mobi- on ceramics. lizes a highly varied mix of skills worldwide.

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In defining its strategy and the conduct of its operations, their employability, their motivation and the long-term Saint-Gobain is mindful of its responsibility of working value of their knowledge; adapting human resources poli- towards sustainable development.The Group realizes that cies and working methods to technological and economic its financial performance depends on how well it handles changes; and lastly, engaging in active dialogue with a number of internal and external challenges for which employee representatives that encourages everyone to several action programs have been drawn up. support the Group’s strategy, within the framework set by This realization has led to a policy of responsible develop- the legal and cultural environment of each country where ment that applies equally to business transactions, in- the Group has operations. house management or relations with outside partners Saint-Gobain’s commitment to responsible stewardship such as customers, suppliers or local authorities. The first then translates into caring for the environment. The devel- application of this policy lies in the Principles of Conduct opment of its operations must not only take into account and Action, which are rolled out, implemented and moni- the health and safety of its employees and of all persons tored throughout the Group. The second concerns con- residing near Group sites, but also avoid impacting the tributing to local development and to overall economic environment. Over the past several years, Saint-Gobain growth. The third involves maintaining standards of cor- has implemented procedures to provide a safe and healthy porate governance that match the market’s recom- work environment for its employees, to prevent industrial mended best practices, to ensure that appropriate checks risks and to monitor and minimize the impact of its man- and balances are in place and maximize the quality of ufacturing operations. decision-making. This chapter will deal with the first two Finally, a growing number of Saint-Gobain’s products and aspects of this policy, while the third is discussed in the services help provide answers to overall sustainable devel- chapter on Corporate Governance. opment challenges. Some of them make it possible to The second part of this sustainable development policy reduce the energy consumption of buildings and thereby aims to build a human community in which each person their emissions of greenhouse gases, while others con- can find the conditions for personal fulfillment. This tribute to generating renewable energy, recycling or means promoting the arising of future leaders, particu- reusing waste, or developing clean technology, and others larly in new countries, who will be able to achieve sustain- still offer solutions to the drinking water needs of major able performance;developing employees’skill-sets to raise urban centers in developing countries.

I - Saint-Gobain’s policy of responsible development

The Saint-Gobain Group’s policy of responsible develop- Although the core of these Principles had guided the activi- ment has been applied in the drafting and implementa- ties of the Group for many years,giving them written expres- tion of Principles of Conduct and Action, and in sub- sion made it easier to roll them out and strengthen their sidiaries’ involvement in their social environment. application within the Group, based on the global scope that it has today. 1.The Saint-Gobain Group’s Principles of Conduct and Action They can be summarized as including the following: ■ five Principles of individual conduct: a) The Principles in brief Professional commitment Respect for others The Board of Directors of Compagnie de Saint-Gobain adopt- Integrity ed the Saint-Gobain Group’s Principles of Conduct and Action Loyalty in January 2003. Solidarity

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Substainable Development

and Principles, that will be included in the international man- ■ four Principles of professional action: agement development seminars that it organizes, and Respect for the law has created a seminar entitled "Ethical and Legal Caring for the environment Dimensions of the Company" for use in France. Worker health and safety Employee rights ■ Tailoring to local conditions In several countries, the introduction of the Principles The application of these Principles is a requirement for meant that some local charters or guidelines had to be belonging to the Saint-Gobain Group. revised. The "Code of Ethics and Business Conduct Guidelines" of Saint-Gobain Corporation in the U.S. was The full text of the Principles was published in the 2002 annu- reworked to include the full text of the Principles of al report and can be found on the www.saint-gobain.com Conduct and Action. The same is true, to varying degrees, website. for several companies in Germany and Scandinavia. The Mexican Delegation, for its part, is planning to revise all b) Implementation the individual charters of its subsidiaries (which state objectives as well as quality and service commitments) for Saint-Gobain has made it a priority to ensure that all greater consistency with the Principles, and to design Group employees take these Principles on board, adopting standard references to the Principles to be used in deal- them as shared values that transcend national differ- ings with customers and suppliers. ences. Some business lines or functions have also found it useful to round out the Principles with additional guidelines ■ Distribution that are specific to the daily running of their operations. The Principles have been translated into 12 languages and One such example is the new Purchasing Charter, intend- were sent to Group managers in English, French or their ed for the purchasing managers of Group subsidiaries national language. The package included a confirmation and for any person whose responsibilities can include of receipt form by which the addressees acknowledged dealing with one or more suppliers. Similar projects are that they had been informed of the Principles. underway for the information technology and environ- In addition to this distribution, each Delegation set up its ment, health and safety functions. own communication plan, using the means of its choos- The Principles represent the bedrock of values applicable ing and setting the pace that it deemed suitable, to allow to the Group as a whole, on which more precise rules or all employees to buy into these Principles. guidelines can be built, to take into account specific situ- In the course of the resulting exchanges, the reasons for ations or responsibilities. the Group’s initiative were explained, feedback was gath- ered and the participants were able to reflect on what ■ Implementation issues may be sensitive and on how to apply these Following this first phase in which the Principles were Principles on a daily basis, within the local context. made known and distributed, the Group is determined to ensure that they will be applied. ■ Training and education That is why the Internal Auditing guidebook includes There is already extensive awareness of the Principles twelve review points on the implementation of the among Group managers. In some cases, managers were Principles by the subsidiaries being audited. The findings informed by their direct superiors, or in more formal from these audits are reported to Group General meetings, or simply through the distribution to all Management. To take an example from another area, in employees of the text of the Principles in the local lan- Benelux and in Mexico the forms for the annual perform- guage. The Group Training Department is also designing ance reviews of managers have been redesigned to include specific training modules on the meaning of the an explicit reference to the Principles.

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2. The Group’s involvement part in the running or launch of five Alizé local-develop- in its social environment ment programs, in which large corporations, local author- ities and national government agencies pool their techni- With the parent company’s encouragement, Saint-Gobain cal and financial resources to support the growth and job subsidiaries contribute to the economic vigor of the creation of small businesses in a given region. Saint- regions where they are based, whether through local ini- Gobain Développement is also taking part in the Platô tiatives or by taking part in national or international pro- project in the region of Béziers in southern France, where grams. a transfer of know-how is being organized between some fifteen large groups and about one hundred small and a) Active involvement in local communities medium-sized companies, based in seven workshops. Over a period of two years, monthly meetings take place in In the countries where they are based, Group subsidiaries which the large corporations share their experience and build close links with professional organizations and local best practices with the small businesses. Following on government authorities, while their Delegations are in from this exchange, Saint-Gobain Développement decid- contact with chambers of commerce, industry associa- ed to provide direct support for the development of two tions and national government agencies. This network of companies in the region, through a low-interest loan in relationships allows Saint-Gobain subsidiaries to develop one case and through technical advice on organizing pro- their operations in the best possible conditions, while duction in the other. public authorities gain better knowledge of the needs of industrial companies, which allows them to make their Although Saint-Gobain Développement has carried out a regions more attractive to industrial investment. few one-time assignments outside France, notably in Canada and Poland, economic support to non-Group com- As an example, in 2003 the Polish Delegation contributed panies is generally the responsibility of Delegations. For to creating the Polish association of glass manufacturers, example, in 2003 the Belgian Delegation started a spinoff which now takes part in talks with the national environ- program as part of an initiative organized by the mental agency. In France, where Saint-Gobain has deep Economic Bureau of Namur Province. The Chinese roots, a dedicated structure was set up in 1979 to handle Delegation also helps small French businesses that are such involvement in local economic life. With its three setting up in China. In other countries, subsidiaries’ con- regional delegations, Saint-Gobain Développement is a tributions to local economic life can take the form of help- permanent contact point for local and regional officials. ing build infrastructure, such as bus shelters, public light- ing, water piping and more.

b) Initiatives to promote economic development at the local level c) Initiatives in support of education

Going beyond this first form of involvement in local eco- In their various operating regions, Group subsidiaries sup- nomic life, Group companies play a direct role in the port education at all levels, with a view to helping train a development of the regions in which they are based, to high-quality workforce. promote the establishment of a welcoming economic environment and the building of high-quality infrastruc- To help improve the overall training of the population, ture. Saint-Gobain Glass India sponsored the building of two primary schools. In Brazil, in addition to the Group’s gifts In France, where the Group has its densest presence, one of equipment to schools, 270 employees benefit from free of the key tasks that Saint-Gobain Développement has access to evening classes that allow them to round out been charged with is helping to revitalize the job market their basic knowledge. And in the United States, helping around Group sites, by offering various types of services to the underprivileged gain access to education is one of the local small and medium-sized businesses – providing job two prime objectives of the Saint-Gobain Corporation creation help, making low-interest loans without requir- Foundation (see below). ing collateral, contributing technical assistance on indus- trial organization issues – as part of a long-term partner- Many partnerships have also been created with universi- ship. In 2003, Saint-Gobain Développement supported the ties and other institutions of higher learning. Local uni- creation of nearly 450 jobs outside the Group and took versities and vocational schools often ask Group special-

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ists to teach certain technical subjects or to mentor a involved vary greatly from one company to another. In class. A number of students receive partial financing of Brazil, Saint-Gobain subsidiaries take part in a broad their studies (in Brazil especially, Group subsidiaries take range of projects, from financing day-care centers, to on part of the cost of training some of their young execu- donating materials and funds to local governments or tives). This allows companies to help tailor the training of associations, organizing conferences on medical educa- young people to the technical and managerial needs of tion for employees’ families or providing assistance to the their future jobs. elderly. For the past two years, the Brazilian Delegation has contributed to the full renovation of a retirement In addition to supporting academic training, outreach home in São Paulo, while subsidiaries of the Flat Glass and programs for young people who are finishing their stud- Abrasives divisions help finance health insurance for their ies are a major focus of the Group’s employment policy. former employees. Outreach programs in Brazil represent Many subsidiaries bring in young workers each year as a total amount of €400,000 – including the educational part of work-study or vocational training programs. The and vocational training projects mentioned above. Saint- beneficiaries of such "youth contracts" accounted for 1.9% Gobain Glass India took part in building a medical center of employees in 2003, slightly more than in 2002. In next to its plant in 2002, and this facility is now used for Germany, the country which traditionally has the largest vaccination campaigns aimed at inhabitants of the neigh- proportion of work-study programs, 845 young people boring villages. benefited from this type of work experience. In France, there were 764 participants, 18% more than in 2002, most- The U.S. Delegation has set up the Saint-Gobain ly in Flat Glass and Building Materials Distribution. More Corporation Foundation, which donated $1.7 million in than 80% of these young people had apprenticeship or 2003, through its three programs, Corporate Direct, vocational training contracts, which are the two most Matching Gifts and Plant Community. Through valuable types of work-study programs. Such preprofes- Corporate Direct, the Foundation provides grants to sional support was also provided to some 300 young charities and cultural organizations, as a first priority in workers in Brazil and 121 in the United Kingdom. the regions where the Delegation’s sites are based. After having had a first extended experience within a Matching Gifts allows employees or retired former company, these young people are better equipped to enter employees to support organizations they care about, the workforce. and to have the Foundation double the amount of their contribution. Lastly, those facilities taking part in the In France, the "PAM Foundation" provides young people Plant Community Program are granted an annual chari- experiencing social or financial difficulties with both table contributions budget based on their number of financial support and the moral support of a mentor from employees, and they are free to make donations to the the Saint-Gobain PAM staff. The PAM Foundation was organizations of their choice. established three and a half years ago and has now In addition to donating building materials, in 2003 become part of the company’s corporate culture. Twenty- CertainTeed contributed the help of its own employees, one young people have already benefited from its help. on their working hours, to Habitat for Humanity, an Other companies, particularly in Belgium and Brazil, are organization aiming to provide needy families with also very active in this field and have designed initiatives decent housing. to help young people enter professional life. Support for charitable causes by European companies tends to be less institutionalized, and it often results from d) Grants to charities and cultural organizations employee initiatives that build cohesion among the staff, such as the idea to donate to UNICEF the amount that Group companies often support the charitable work of would have gone into a year-end gift (in Italy), or sponsor- non-governmental organizations, either through finan- ing annually the training of seeing-eye dogs in Belgium. cial contributions or through donations of building mate- As part of the "Together" project launched at the end of rials or information technology equipment. 2002, employees of Jewson and Graham organized 400 The causes for which support is provided are mainly med- sporting and community events with the help of suppli- ical or related to helping the most needy. The amounts ers and customers, which generated €400,000 for a char- ity that helps sick children. This project brought employ- ees together around a cause and strengthened their feel- (1) Data concerning youth contracts are based on 71 % of total Group staff. ing of belonging to the Group.

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In addition to many cultural and intellectual initiatives research agencies, such as CNRS in France. Thanks to taking place at the local level, the following are particular- exchanges with scientists outside the Group and to the ly significant. financing of thesis work, Saint-Gobain is able to maintain For the past six years, Compagnie de Saint-Gobain has and develop its knowledge of areas that can be strategic provided support, as part of a multi-year agreement, for the both for the Group and for the technological development Louvre museum’s acquisition of paintings of the Northern of the countries where it is based. European School, in recognition of the Group’s long-stand- In the same spirit of intellectual exchange, the Group cre- ing presence in Germany and Scandinavia. The Group also ated the Saint-Gobain Center for Economic Research – co- supports the Friends of the Georges Pompidou Center asso- chaired by Robert Solow, winner of the Nobel Prize in ciation and often takes part in renovation projects, mainly Economics, and Jean-Louis Beffa – whose mission is to by providing glass products. support research in this field. Several Group Delegations take an active part in promoting economic and cultural exchanges between their countries In sponsoring charities and cultural organizations, as with and France, through extensive work with French chambers all its outreach activities, the Group focuses primarily on of commerce or associations of French companies. local projects and on initiatives that tie in with its opera- Finally, most of Saint-Gobain’s research centers work tions, in order to make its involvement in society an exten- closely with university institutes and government sion of its corporate culture and strategy.

II - A human community

Saint-Gobain’s Human Resources management policy is a and generate free cash flow that is then invested in the major component of Group strategy. Its purpose is to antic- new businesses (Ceramics & Plastics, Abrasives, ipate the needs of the organizations that make up the Reinforcements and Building Materials Distribution) and Group, create the conditions that cause employees to sup- in emerging countries. port company objectives, and meet employee needs by tak- ing into account their career projects and providing satis- Breakdown by region of employee headcount ▼ factory work conditions. Ultimately, it serves a vision of Saint-Gobain as a community of men and women linked by Asia (incl. India)-Pacific ties of solidarity. Brazil, Argentina, Chile South Africa 0.4% Toward this ambitious end, 868 managers direct the work Mexico, Colombia, 6.6% France Venezuela of a well-structured global organization that is based on 6.9% the twofold Division/Delegation principle. HR teams are 1.5% 29.9% close to employees at the local level, yet they also apply a United States, common management framework defined by the Group. Canada 14.8 % 1. Human resources: Other Europe a constantly evolving picture 0.9% 3.4% Benelux Eastern 4.7% At December 31, 2003, the Group had 172,811 employees in Europe 10.8% 46 countries . Of this total, 30% worked in Building 10.5% Germany 4.9% Materials Distribution and 70% in the industrial busi- Spain, Portugal, United-Kingdom Morocco nesses. The breakdown by division and by country reflects some of the dynamics currently at play in the Group’s Nordic countries Italy 2.0% 2.6% development. The historic businesses of Flat Glass, Containers, Insulation, Pipe and Building Materials are steadily automating their processes to raise productivity *Data concerning numbers of employees are based on 100% of the Group's scope.

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Breakdown by division of employee headcount 2002, was strongly affected by flat capital spending and ▼ falling prices in its markets, and had to shrink its staff by Pipe 5.5% based on a comparable structure. Buildings Parent Company/ Materials Delegations/Other 1% Trends were more mixed in the historic businesses, Buildings 6% 5% reflecting both the response to the market context and Materials the Group’s determination to streamline its manufactur- Distribution Flat Glass 30% ing capabilities in Western Europe and North America in 21% order to generate the free cash flow needed to develop operations in emerging countries. Flat Glass and Containers further rationalized their pro-

5% Insulation duction and downsized by 1.2% and 1.8% respectively on a comparable basis. Flat Glass, however, increased its 5% employee numbers in its new markets of Eastern Europe Reinforcements 7% and Asia. 12% Abrasives 8% Despite cutbacks in Germany, the Building Materials Containers Division’s numbers were practically unchanged, with only Ceramics & Plastics a 0.7% dip, similar to the 0.2% decline in 2002. Insulation and Pipe, on the other hand, reversed the downward trends they had experienced in 2002. a) Employment trends Insulation staff grew by a slight 0.3%, following a 5.2% At December 31, 2003, the Group had 454 more employees decrease in 2002, as development in new countries, par- than at the 2002 year-end. This near-stability is attributa- ticularly the opening of the Yegorievsk plant in Russia, off- ble to a 1.5% expansion in headcount from the Group’s set downsizing in other countries. The Pipe division was a external growth operations, offset by a 1.2% decline in the net creator of jobs, especially in China, the Czech Republic number of employees based on a comparable Group and Brazil. In this last country, large-scale recruitments structure. resulted from the winning of a major contract in the Dominican Republic. Overall, headcount in the Pipe divi- Despite the disposal of Saint-Gobain Terreal in October sion rose 1.2%, versus a 1.5% contraction in 2002. 2003, the net effect of changes in scope was an addition of 2,524 new employees. Three-quarters of employees Based on a comparable structure, Building Materials brought in through acquisitions were in the Building Distribution remained as buoyant on the hiring front as in Materials Distribution division, which is continuing to 2002, in spite of having had to restructure the German pursue external growth, in line with Saint-Gobain’s policy and Dutch subsidiaries that suffered from the crisis in the of investing in its new businesses. building industry. Total staff numbers rose 0.7%. Most of The 1.2% decrease in headcount based on a comparable the Division’s subsidiaries experienced organic growth, Group structure, following a similar dip in 2002, was but "La Plateforme du Bâtiment" deserves a particular mainly due to persistently lackluster economic conditions, mention. At December 31, 2003, this chain had 30% more particularly for the businesses of Ceramics and employees than a year earlier, to support its continuing Composites. development. In all, this new retailing concept has allowed the creation of nearly 2,000 new jobs in eight The Abrasives and Ceramics & Plastics divisions, which countries since its launch in 1998. have been hard hit by the industrial slowdown in their markets since 2001, kept up their drive to streamline their In 2003 most Western countries, except France, reduced operations. However, thanks to an upturn in their operat- their numbers of employees, due to the persistent market ing margins and to a turnaround in some of their market slowdown and to the Group’s determination to automate segments, both were able to slow down the contraction in manufacturing processes. In Germany, where the eco- their numbers of employees. They recorded decreases in nomic situation was particularly unfavorable, teams headcount of 5.4% and 3.4% respectively based on a com- shrank by a significant 5.2%. The Nordic countries also parable structure, versus falls of 6.4% and 6.9% last year. downsized by more than 5% because of difficulties The Reinforcements business, which had created jobs in encountered in several divisions. France, for its part, expe-

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rienced net job growth, after having maintained its staff

▼ Departure Rate numbers in 2002, thanks to the large footprint and rapid based on a comparable Group structure development of Building Materials Distribution in the 35

country. 31.8%

30 Group subsidiaries in emerging countries, riding favor- 27.3% able market trends and boosted by Saint-Gobain’s strate- 26.0% 25 gy, were also on an upward trend: up 1% in Central 23.7% 22.1% 22.8% 20.9% America, 1.8% in South America, 2.1% in the Asia-Pacific 19.4% 20 19.4% region and 4.6% in Eastern Europe. 19.1% 18.6% 18.5% 17.8% 17.7% 16.0% 16.1% 16.6% 15.0% 15.2% b) Hires and departures* 15

10.8% 11.2% 10.1% The hiring rate fell by 1.5 points, to 15.5%, while the depar- 10 8.7% 8.8% 8.4% ture rate was down 1.9 points, to 16.6%. These figures main- 8.0%

ly reflect lower turnover in most divisions, though this rate 5 remains higher in Building Materials Distribution than in the industrial divisions. Staff replacements also tend to 0 France- Germany- Benelux Spain Italy- UK- Nordic Eastern USA- Central South Asia- Total happen more rapidly in countries where the job market is Switzer- Austria Portugal Greece Ireland countries Europe Canada America America Pacific land most buoyant and in those where the Group is launching 2002 2003 greenfield operations. In the latter case, there is always a ramp-up period until stable teams have been set up. In this c) Reasons for departures** context, the improvement in staff turnover rates in Mexico, The attrition rate for 2003 was 2.1%. There are more retire- where there had been some difficulty in building stable ments in Europe and the United States than in Asia or Latin teams, reflects genuine progress. America, where Saint-Gobain’s operations have started more recently and where the overall population is younger. For the Group as a whole, the resignation rate fell by one percentage point, to 5.8%. It has been reduced in all divi- sions, but remains higher in Building Materials

▼ Recruitment Rate Distribution and in countries where staff rotation is tradi- based on a comparable Group structure tionally higher than the Group average. 30

26.1% ▼ Resignation Rate 25.3% 25 24.7% based on a comparable Group structure 23.7% 22.5% 12 11.4% 20.9% 20 19.1% 10 9.6% 18.3% 18.8% 17.0% 17.3% 17.0% 15.7% 16.0% 15.1% 14.4% 15.5% 8 7.7% 15 7.3% 14.3% 6.9% 6.3% 12.0% 5.9% 6 5.7% 5.8% 9.5% 10.1% 4.9% 10 9.4% 4.5% 4.5% 4.5% 8.7% 4.2% 7.2% 4.1% 4 3.7% 3.6% 6.4% 6.5% 3%

5 2 1.7% 1.6%

0 0 Flat Insulation Containers Reinfor- Ceramics Abrasives Building Building Pipe Total France- Germany- Benelux Spain Italy- UK- Nordic Eastern USA- Central South Asia- Total Glass cements & Materials Materials Switzer- Austria Portugal Greece Ireland countries Europe Canada America America Pacific Plastics Distribution land 2002 2003 2002 2003

* Data concerning rates of recruitment and departure are based on 83% of ** Data concerning reasons for departures are based on 94% of Group staff. total Group staff.

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Layoffs affected 5.3% of total staff, 1.3 percentage points In Abrasives and Ceramics & Plastics, however, the down- below the 2002 rate, in line with the overall decrease in ward trend bottomed out and the rates of layoffs for eco- departure rates. Layoffs for economic reasons also nomic reasons declined by 5 and 3.4 percentage points declined, from 2.9% of staff to 1.8%. respectively.

The Reinforcements division downsized through restruc- Lastly, the Building Materials Distribution and Building turing plans and, in some countries, through early retire- Materials divisions continue to have high layoff rates due ment plans. to stronger employee turnover,related to the nature of the business for the first and to a strong presence in the United States for the other.

▼ Layoff Rate by Division

12 11.1%

10 9.4% 8.9% 8% 7.5% 8 7.2% 7.4% 6.9% 6.8% 6.3% 6.6% 6 5.4% 5.3% 5.2% 4.6% 4.5% 4.3%

4 3.3% 2.6% 2.9% 2.6% 2.9% 2.0% 2.4% 4.1% 3.5% 3.4% 2 2.5% 2.9% 2.2% 2.7% 2.5% 0.3% 2.2% 1.8% 1.7% 1.4% 0.7% 1% 1.3% 0 Flat Glass Insulation Containers Reinforcements Ceramics Abrasives Building Building Pipe Total & Plastics Materials Materials Distribution

Layoff Rate by Division 2002 Of which downsizing Layoff Rate by Division 2003 Of which downsizing

d) Programs to preserve jobs e) Recruitment*

The Group carries out downsizing or restructuring pro- To make up for these departures and to drive Group grams only when these are unavoidably required for the growth, nearly 25,400 people had the opportunity of join- economic health of the subsidiary or division concerned. In ing the Group in 2003. Building Materials Distribution led such cases the Group’s size is undeniably an advantage, the field with over 11,200 recruitments, followed by Flat since it is often possible, in almost all countries where the Glass with 4,600 and, to a lesser degree, Containers and Group is based, to offer employees a new position in Building Materials with over 2,000 and over 1,500 new another subsidiary, if they so wish. In several countries, employees respectively. Group companies also provide many types of outplace- ment help to employees affected by redundancies. Western countries were still at the forefront of hiring, par- ticularly France, the United Kingdom and the United In France, Saint-Gobain Développement offers personal States, with 7,700, 4,500 and 3,100 new employees respec- support to the employees concerned, taking into account, tively in 2003. Subsidiaries in high-growth areas, particu- for each person, the professional, material, psychological larly South America and Eastern Europe, were also active and family consequences of the redundancy. This way all recruiters and brought on board more than 5,700 new can benefit, according to their needs, from additional train- people. ing, assistance for relocating and outplacement for the spouse, or support for implementing a personal project, and more. * Data concerning recruitment cover 95% of Group staff in 2003.

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▼ Breakdown of 2003 Recruitment by Division ▼ Breakdown of 2003 Recruitment by Region

South America Buildings Materials Asia-Pacific Pipe Central America France, Buildings 4% Materials 7% 2% 8% Switzerland Distribution 4% United States, Flat Glass 32% 45% Canada 12% 18% Eastern Europe 8%

5% Insulation Germany, 8% 18% 6% Austria 4% UK, 4% 5% Containers Ireland 6% Benelux 2% Reinforcements Spain, Portugal Abrasives Ceramics & Plastics Nordic countries Italy, Greece 1% 1%

f) Use of temporary workers and contractors help handle the volume of non-recurring orders. In Pipe, the increase in this type of work was related to the need for • Temporary work additional staff brought on by the major water-supply con- When future orders are hard to forecast, if recruitment is tract in Abu Dhabi. Lastly, in Poland, temporary workers hampered by temporary difficulties, or if a missing were chosen by several subsidiaries as the best solution to employee needs to be replaced, Group subsidiaries may handle seasonal peaks in demand. call upon temporary workers. Absenteeism was up slightly in 2003, reaching 4.3% of hours worked, from 3.9% in 2002. Its causes broke down as

follows: illness accounted for 72%, work accidents for 6%, ▼ Proportion of Temporary Workers maternity leave for 8% and miscellaneous causes for 14%(1). 10 9.3% The services of temporary work agencies are particularly 8.6% 8% well suited when there is little advance notice and the 8 7.7% duration of the need is unknown, therefore they are used 7.3% 6.3% to replace absent employees or to make a temporary tran- 6.3% 6 5.3% 5.4% sition. They also sometimes make it possible to meet a 5% 5.1% 4.7% large need for staff with very little lead time, while a 4.2% 4% 4 3.8% recruitment process would necessarily be more time-con- 3.4% suming. The proportion of temporary worker hours within 2.8% 2.8% 1.9% total hours worked, was 5.1%(2) in 2003, up one percentage 2 1.6% point on 2002.This increase applied to all business lines. In

Reinforcements, the ramp-up of Mexican operations creat- 0 Flat Insulation Containers Reinfor- Ceramics Abrasives Building Building Pipe Total ed a strong need for personnel, which was initially satisfied Glass cements & Materials Materials Plastics Distribution by hiring temporary workers. In Ceramics & Plastics, sever- 2002 2003 al French companies underwent restructuring which affected their production, when employees were exempt- ed from serving their notice periods or were rapidly trans- ferred to another position, hence the use of temporary (1) Data concerning absenteeism are based on 79% of total Group staff and 92% of non-U.S. staff. staff. Within the Containers Division, French subsidiaries (2) Data concerning temporary workers are based on 71% of total Group staff specialized in glass painting recruited temporary staff to and 83.5% of non-U.S. staff.

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Fixed-term employment contracts are better suited for •Use of contractors assignments spanning several months, such as replace- In all countries where the Group has operations, other ments of workers on maternity leave or extended sick leave, companies are called upon to perform work that does not or large-scale orders. At December 31, 2003, 4.4% of Group match the Group subsidiary's expertise. Two types of work employees had fixed-term contracts, up 0.7 percentage can be outsourced in this way.The most common are ancil- points compared to 2002, the result of varying trends from lary tasks such as security, maintenance, cleaning, catering, one Division to another. The proportion of fixed-term con- medical services and, for smaller units, payroll services, tracts declined in Insulation and Building Materials, information technology or accounting. Other tasks that remained level in Building Materials Distribution and are sometimes outsourced are packaging, and handling or Ceramics & Plastics, and increased in the other businesses. shipping of products. Although related to the manufactur- The rise in the number of fixed-term contracts in Flat Glass, ing and distribution of products, such tasks remain outside Reinforcements, Abrasives and Pipe is partly due to the the Group's core business. inclusion of additional data concerning the Group's Before signing an outsourcing contract, Saint-Gobain sub- Chinese subsidiaries. Further, when new plants came on sidiaries are required to verify that the partner company's stream in China (Flat Glass and Reinforcements), Mexico operations and work contracts comply with all applicable (Reinforcements) and the Czech Republic (Pipe), employees regulations. Since site managers can be held responsible were initially recruited under contracts of a few months for any health or security matters affecting an individual before being hired for an indefinite period. The same working on their site, the employees of contractors called applies to certain countries such as the Netherlands, in upon to work at Group sites are subject to the same rules which short-term contracts are often used as probationary as Group staff. In a certain number of cases, they receive periods. Thus, although 28.9% of hires take place under specific training on health and safety issues. temporary work contracts – and even up to 60% in Insulation and Pipe – the proportion of such contracts which are then turned into indefinite contracts is statisti- 2. Human resources policies that match cally equivalent to 35% of the total number of workers with Group strategy temporary contracts at December 31, 2003(1). a) Changes in employee categories(2)

Saint-Gobain employees can be divided into three broad categories: executives and managers; clerical staff, techni-

▼ Percentage of Employees on Fixed-Term Contracts at December 31 cians and supervisors; and blue-collar workers

10 • Executives and managers The proportion of executives and managers within total 8 7.6% 7.8% 7.7% staff was 11.1%, on a par with the figure for 2002. Western 6.6% 6.5% countries tend to have a slightly higher proportion of 6.0% 5.9% 6 5.6% executive-band personnel, 12% of staff, than do the new

4.4% countries of Latin America and especially Asia and Eastern

4 3.7% 3.7% Europe, where executives account for 7.2% of employees. 3.0% This difference is mainly attributable to the greater num- 2.4% 2.6% 2.4% 2.4% 2.2% 2.0% 2.2% 2 1.8% ber of head offices and research and development centers in the countries where the Group has a long-standing presence. 0 Flat Insulation Containers Reinfor- Ceramics Abrasives Building Building Pipe Total Glass cements & Materials Materials Plastics Distribution Clerical staff, technicians and supervisors 2002 2003 • This category, which accounts for 35.2% of employees, includes administrative staff, technicians, supervisors and sales personnel.Two-thirds of Building Materials Distribution employees are part of this category since, except for workers in Lapeyre factories and Point P facilities, all non-executive (1)All data presented concerning temporary work contracts are based on between 92% and 95% of total Group staff. staff is composed of stockroom attendants, sales staff, (2) Data concerning employee categories are based on 92% of Group staff. cashiers and similar functions. In the industrial divisions, the

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proportion of employees in this category varies from 16.4% to sion of additional data concerning certain facilities, to tem- 30.5% of staff, depending on the size of sales teams, the way porary overload in the order books and to the commission- in which work is organized or the level of technical complexi- ing of a new plant in CertainTeed's windows business. In ty of the business. the Pipe Division, the major contracts for water-supply pip- ing in the Dominican Republic and Abu Dhabi led to over- • Blue-collar workers time work for Brazilian and British employees. The proportion of blue-collar workers within total staff Building Materials Distribution, which mostly includes out- remained stable, at 53.7% in 2003, with the same variation lets with set opening and closing hours, still has the lowest from one division to another as in 2002. 24.6% of Building overtime rate in the Group, at 1.9%. Materials Distribution Division employees are blue-collar workers, mainly within Lapeyre factories, since few employ- ees of sales outlets are classified in this category. In indus-

trial divisions, blue-collar workers represent 65.8% of the ▼ Overtime Rate workforce, a percentage that varies according to the size of 10 the teams not directly related to manufacturing, such as 8.7% the sales force or research and development centers. 8 7.2% b) Working conditions, an evolving framework 6.5% 6% 6 5.5% 5.1% 5.2% Organization of work 4.7% 4.5% 4.8% • 4.4% 4.4% ■ (1) 4% Working hours 4 3.8% 3.9% 3.3% Work is organized in shifts in many manufacturing activi- 2.9% 2.6% ties, to meet technical requirements. Distribution opera- 2.2% 2 1.9% tions do not have this type of work. In industrial operations 50.6% of employees perform shift work, and the proportion 0 rises to about two-thirds in Reinforcements and Containers. Flat Insulation Containers Reinfor- Ceramics Abrasives Building Building Pipe Total Glass cements & Materials Materials These proportions are basically unchanged compared to Plastics Distribution 2002 2003 2002. Each workstation can have two or three shifts, or even more in some cases, when work takes place 24/7, in uninterrupt- ed production. The latter schedule concerns one-third of ■ Part-time work(3) employees doing shift work within the industrial compa- Part-time work is not very well suited to industrial work nies, mainly in glass production lines. patterns, and it concerns only 2.9% of Group employees, Throughout the Group, any uninterrupted production takes 10.3% of women and 1.2% of men.The overall rate rose 0.5 per- place in cycles, alternating between working and rest & centage points compared to 2002, an increase that mostly recuperation periods. Overall, in all countries the number of concerned women. hours worked annually by shift workers is lower than that of workers who have a daily schedule. • Compensation policy ■ Wages ■ Overtime(2) The Group's compensation policy aims to be fair, motivat- To meet a temporary increase in their workload, some ing and transparent. Basic wages are set in each country Group companies sometimes need to ask their employees and each economic sector in relation to market conditions. to work overtime. On average, these overtime hours repre- In Western countries, wages increase at least in line with sented 4% of hours worked in 2003, as in 2002. The propor- the inflation rate, to at least maintain employees' purchas- tion rose in Containers and Building Materials, where it ing power. In emerging countries, wages rise regularly as reached 6.5% and 8.7% respectively.This increase was most- new skills are called upon, which leads to a higher standard ly noticeable in the United States and was due to the inclu- of living. Within this general framework, each subsidiary sets employees' wages based on conditions in its business line

(1) Data concerning working hours are based on 88.5% of total Group staff. and its financial position and human resources situation. (2) Data concerning overtime are based on 93% of total Group staff. In all Group companies, the average wage for blue-collar (3) Data concerning part-time work are based on 91% of total Group staff. workers is higher than the domestic minimum.

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In France, the average annual wage of blue-collar workers c) The importance of dialogue with employee rose 2.3% in relation to 2002(1).Payroll taxes amounted to representatives 43.4% of direct remuneration in Building Materials Distribution and 51.3% in the industrial divisions(2). The Saint-Gobain Group attaches a great deal of impor- Executives' wages include a variable portion for which tance to the quality of its dialogue with employee repre- rules are set at Group level and tailored to each region sentatives. Because of the need to raise performance with- based on local conditions. in a perpetually changing environment, the Group fre- Also, to encourage teamwork and ensure that the fruits of quently has to make rapid changes in organization and success are shared by all, the Group encourages its sub- working conditions, drawing upon consultations with sidiaries to sign collective employee incentive profit-shar- employee representatives. In each region, therefore, the ing agreements whenever possible. General Delegations coordinate employee relations, to In France 87.5% of subsidiaries have signed these agree- ensure that specific local features are adequately taken ments, which cover nearly 95.5% of employees in the coun- into account. try. In 2003, these companies paid €52.4 million to their employees as profit-sharing bonuses, which represented In 2003 as in 2002, 66% of employees had an employee 3.8% of total wages. representative body within their work establishment(4).The lack of an employee representative body is generally attrib- ■ Employee benefits utable either to the size of the company or to particular The development, since 1988, of the Group Savings Plan local practices. In fact, the divisions in which the rate of (PEG) reflects Saint-Gobain's determination to involve its representation is highest are Containers (85%) and Pipe employees more closely in the future of the company, by (87%), where facilities are largest, whereas divisions where offering them the opportunity of becoming shareholders most facilities are small (Building Materials, Building under very favorable terms. Materials Distribution and Ceramics & Plastics) have rates Thanks to this program, which is active in 27 countries, any that are below the Group average, ranging from 48% to employee with at least three months' seniority (six months 53%. The lack of employee representation can also be due in some countries) can purchase shares under favorable to the fact that there are no trade unions or individuals conditions with a discount on the stock market price who are in a position to take on this function, or to specif- (throughout the Group) and, in France only, a very attrac- ic national features. Whenever they have interlocutors tive offer by which the Company supplements each within a legal framework, Saint-Gobain site managers employee's investment. The savings generated under this endeavor to pursue a lively and respectful dialogue with plan, amounting to an average of €3,500 per year per the employee representatives that the staff have chosen. employee, including the Company's matching of employee input, generally become available after a period of five to A total of 900 agreements were signed with employee rep- ten years. The Group Savings Plan mutual funds held 7.4% resentatives in the Group in 2003.The change in this num- of Compagnie de Saint-Gobain capital stock at the end of ber compared to 2002 is not particularly significant, as in 2003, and 11.7% of voting rights. Other information con- several countries agreements cover several years. These cerning the PEG is provided on page 17. agreements dealt with wages (37%), working conditions (24%), and, to a lesser degree, employment (7%), vocational In most countries where the Group is based, whether in training (4%) or other issues(5). Europe, Asia or Latin America, Group subsidiaries give their employees supplementary benefits in addition to those Lastly, 66% of Group employees, and 100% in France, are provided by law (e.g. additional medical cover, pensions or covered by a collective-bargaining agreement(6). life insurance), as well as grants for meals and sometimes for commuting. In France, in all companies with over 50 employees, 1.1% of the payroll is earmarked for activities to benefit employees, managed by the Works Councils(3). (4) In order to more closely reflect the day-to-day reality of employees, the indi- cator concerning the existence of an employee representative body was shift- ed in 2003 from the level of the employee's company to the establishment of (1) Data concerning average annual wages of blue-collar workers in France employment. Data concerning employee representatives are based on 88.5% are based on 84% of total French staff (on a comparable structure basis). of total Group staff. (2) Data concerning payroll taxes are based on a representative sample of com- (5) Data concerning the total number of agreements signed are based on 90% panies covering 25% of total staff in France. of total staff and the breakdown by subject is based on 72.5%. (3)Data concerning employee benefit activities by Works Councils are based (6) Data concerning collective-bargaining agreements are based on 72% of on 81% of French staff. total Group staff.

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▼ Proportion of Staff Covered official recognition, and as such it represents a new mile- by a Collective-bargaining Agreement stone in the development of dialogue with employee rep- at December 31, 2003 resentatives at the European level.

90 84% 78% 80 3. Human resources management 75% 71% with a view to the future 70 64% 66% 63% 62% 63% 60% 60 a) Recruiting for tomorrow's needs

50 Bringing in a new generation 40 • The average age of Group employees is 40, six months 30 higher than in 2002(1).Ithas remained fairly stable in all 20 divisions. In Insulation, Containers, Pipe and Ceramics & 10 Plastics, where seniority is also higher than the Group

0 mean, the average age is over 42. Flat Insulation Containers Reinfor- Ceramics Abrasives Building Building Pipe Total Glass cements & Materials Materials Age distribution data show that employees tend to be Plastics Distribution older and have more seniority in Europe and the United States, where the Group has a long-standing presence. The industrial subsidiaries pay particular attention to In addition to a Group Works Committee and central bringing in a new generation, as the baby-boomers are employee representative coordinators for all of France, reaching retirement age. Several countries have focused Saint-Gobain has since 1988 set up a European-level forum specifically on recruiting workers under 25 in 2003(2).These for employee relations, based on the recognition that young employees accounted for 48% of hires in Germany, Europe constitutes a socially homogenous zone of conver- 42% in Spain and 50% in the Nordic countries. gence. A plenary meeting has been held each year since This issue is not a concern for companies based in the 1992 as part of the Collective Agreement on European emerging countries of Eastern Europe, Latin America and Employee Consultation. It brings together 70 employee Asia, where the Group presence has developed more representatives from European Union countries, recently. The average age in these regions is 35 and a half, Switzerland and Norway. During this meeting the and seniority averages about seven years(3). Chairman of Saint-Gobain exchanges views with employee Workers under 25 accounted for 36.4% of total Group representatives concerning the Group's strategy and vari- recruitments in 2003, one percentage point higher than ous economic, financial and social issues of interest to all in 2002. In addition to the deliberate effort by certain European subsidiaries. Saint-Gobain is currently working companies to rebalance their age distribution, this figure on how to integrate the countries that are about to join varies based on different countries' traditions in terms of the European Union. higher education and according to how buoyant the job A permanent secretariat in charge of the year-long follow- market is for this age group. up with European employee representatives keeps up reg- ular exchanges with Human Resources management at • Attracting top talent Group and Delegation levels. This secretariat includes Saint-Gobain seeks to attract top talent through public eight members of seven different nationalities – German, relations campaigns aimed at the student body and by French, British, Spanish, Italian, Dutch and Norwegian. building special relationships with universities and pro- Their status was made official in a specific agreement, grams that teach the skills the Group needs. In 2003, the signed on March 4, 2004, that gives them technical Group took part in university forums in Germany, Spain, resources and allots a specific number of hours for the per- Italy, Sweden, Poland, China and in the United States, in formance of their duties, which are clearly defined. In addi- addition to ten such events in France. The Company has tion, Group executive management has undertaken to also built many ties with business and engineering keep the members of the permanent secretariat informed "of changes in Group scope or structure whenever such changes have an impact on employment, and will affect, or (1) Data concerning the average age of employees are based on 93.6% of total Group staff. may affect, the Group as a whole or at least two Group (2) Data concerning the hiring of employees under 25 are based on 78% of total companies based in two European countries." This new Group staff and 92% of staff outside North America. agreement therefore gives the permanent secretaries an (3) Data concerning seniority are based on 90% of Group staff.

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schools, from sponsoring a specialized program or class to ▼ Proportion of Female Employees personalized support for individual students. In France, at December 31 the Group co-finances an average of 5 or 6 theses per year, 25 as part of CIFRE agreements (industrial agreements on 22.6% 21.7% 21.6% 21.2% 21.8% training through research). Since this joint financing sys- 20.3% 21.2% 19.1% 20 18.8% 19.9% tem was set up with the French Ministry of Research in 18.6% 16.5% 16.6% 17.7% 1981, about 150 students have done thesis work at Saint- 15.8% 16.6% 15.8% 15.0% Gobain. Of those who were at Saint-Gobain Recherche, 15 75% subsequently began their careers within the Group. 9.5% The recruitment section of the Saint-Gobain website 10 9.3% receives about 12,000 applications per year, of which 30% are then redistributed to the divisions and subsidiaries. 5 The Group also uses the French job search engine "Keljob", to give its job offers maximum exposure. 0 Locally, each Delegation and company conducts its own Flat Insulation Containers Reinfor- Ceramics Abrasives Building Building Pipe Total Glass cements & Materials Materials recruitment strategy, generally using its own website. Plastics Distribution 2002 2003 Based on their needs, they build relationships with nearby schools and universities, welcome interns, sponsor pro- grams and organize factory visits to introduce the compa- Insulation, at levels that are below the Group average, but ny to students. has increased in Containers and Building Materials. These In Belgium, as an example, the Group takes part in the trends mostly reflect different local traditions and compa- DREAM program, under which it organizes open days for ny policies in the various countries where each of the divi- students who are finishing secondary school, to allow sions are based. For cultural reasons, there is a higher pro- them to discover its businesses. Saint-Gobain Glass India, portion of women within the staff in Nordic countries, in for its part, finances the engineering studies of several Eastern Europe and in the United States than in the rest of students. The "Become a global player" program in the Group. The proportion is lower, but rising more rapid- Germany is further developing and expanding to Austria. ly, in Germany, Spain and Italy, because these countries It allows high-potential young people of all nationalities have deliberately implemented policies to address this to carry out three six-month assignments in two coun- imbalance. In Germany, even though women represent tries before taking up a permanent position in Germany. 18.4% of total staff, they account for 26.2% of new hires. This helps integrate them into the global Group and Women receive 13.7%(2) of total wages, because they occupy a improves their ability to work within multi-cultural less substantial share of executive functions, particularly in teams. Nine out of ten participants in the first graduating senior management, because more of them work part-time, class were hired, therefore the Delegation is aiming to and because they tend to be younger and have less seniority build on this success and recruit a new class. (their average seniority is 2 years lower than men's). The Building Materials Distribution companies Jewson The Group is determined to achieve a better balance and Graham in the United Kingdom and Point.P in France between men and women at the management level. The have even set up their own work-study training programs aim is to ensure, in recruitment and access to functions which allow them both to provide the young trainees with wielding responsibility, equal opportunity that is compat- a nationally recognized qualification and to train sales- ible with the nature of the work involved. Increasingly people in their products and methods. feminine leadership should promote a greater variety of approaches and better awareness of different sensitivi- b) Raising the proportion of women(1) ties, both in managing staff and in conducting relations with outside partners. The proportion of women in total staff was 19.1% at This change is happening slowly: 14% of management are December 31, 2003, slightly higher than in 2002. Women women, up from 13% in 2002 and 10% in 1997(3).Women fill 27.6% of non-factory work positions and account for

20.3% of new hires. (1) Data concerning the proportion of women are based on 95% of total Group staff The proportion of women is slightly higher in the new – 92% for hiring data. businesses, where they represent over 20% of total staff, a (2) Data concerning the proportion of women in Group staff are based on 66% of total Group staff and 78% of the total outside North America. share that has remained stable. The proportion has also (3) Data concerning the proportion of women in management are based on the remained basically unchanged in Flat Glass, Pipe and management database that included some 15,900 individuals at December 31,2003.

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are found mostly in finance (27% of the staff), human their results, they can adapt their training from one year to the resources (38%) and tax and legal functions (47%), but next, based on the Group's needs and their own character. remain fairly rare in manufacturing-related work and in general management of facilities or companies. d) Building skills through training

c) Offering attractive career development In 2003, each employee received 17 hours of training on prospects average(2),for a total cost equivalent to 1.7% of payroll(3). These figures are on a par with those of 2002, and include Mobility of management staff between regions and functions data for North America for the first time. is one of the essential building-blocks of Saint-Gobain's devel- opment.Because increasingly international teams are an inte- gral part of its competitiveness, the Group seeks to encourage a multicultural outlook among all its managers. This policy

▼ Average Number of Training Hours translates into numerous international meetings where the per Employee

sharing of feedback builds a common corporate culture, and 60 55.2 frequent assignments of employees outside their home coun- 53.9 try, particularly at the outset of their career. As a result, 7% of 0 executives work in international postings(1). 40 36.6 The systematic roll-out of annual performance evaluations 30 and the posting of job offers on the Intranet have helped fuel 25.2 22.6 22.3 17.2 sustained interest in mobility options. By taking individuals' 16.9 20 18.7 15.5 18.1 16.7 10.5 13.9 15.3 wishes into account and laying down clear, transparent crite- 13.9 14.3 14.1 11.8 13.4 12.4 13.2 ria governing expatriate positions, the Group has helped 11.9 11.5 10 9.3 8.9 ensure that international mobility fulfills employees' expecta- tions at the same time as it serves the company's interest.The 0 France- Germany- Benelux Spain Italy- UK- Nordic Eastern USA- Central South Asia- South Total rate of mobility for executives in 2003, calculated using all Switzer- Austria Portugal Greece Ireland countries Europe Canada America America Pacific Africa land movements in which an executive changed work facility at 2002 2003 least once in 2003, divided by the total number of executives, came to 7%.

In managing careers,one of the Group's aims is to bring about There have been new developments along three avenues the emergence of high-level leaders who can operate in an for improvement: international environment and bring teams to sustainable strong performance.Toward this end, Saint-Gobain has set up • Creating a common reference framework for skills a specific program to identify and train the future leaders that development will carry Saint-Gobain's strategy and management methods During the first half of 2003, an international working group into the future.The profile of promising executives is analyzed defined three levels of training indicators that will be set based on open criteria applied consistently throughout all up gradually: Group companies, in which "people skills" such as listening –The record-keeping level brings together the minimal data, ability, the sharing of knowledge or the understanding of e.g. on hours of training and on expenditure, that are already other cultures play a large part.Their career is then tailored to being gathered within the Group. their initial training and to the abilities they wish to build. – The management level is designed to provide a deeper Through a variety of experiences in different countries, differ- analysis and understanding of training programs, to assess ent divisions and different functions, they are prepared to take their effectiveness and tailor them to needs. This second on substantial responsibilities. Thanks to regular reviews of category of indicators was launched in 2003. It includes information on training programs and their application, and on the content of seminars. (1) Data concerning executives are based on the management database that includ- – The strategic level, which will be implemented gradually, ed some 15,900 individuals at December 31, 2003. will allow a qualitative assessment of how training pro- (2) Data concerning hours of training are based on 92.5% of total Group staff. grams contribute to strategic development objectives. (3) Data concerning the portion of payroll devoted to training are based on 85% of total Group staff. Using this common reference framework, each subsidiary

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will be able to adapt its training efforts in line with its management in these regions and on the development strategic priorities and with the benefit of other Group strategy that the Group is pursuing there. Rolling out these companies' experience. At a global level, Saint-Gobain will programs locally will make it easier for local executives to be able to drive the development of the skill-sets that under- take part, while allowing executives coming from countries pin the success of its strategy. where the Group has a long-standing presence to gain an understanding of the specific challenges that arise in these • Supporting Group strategy regions. ■ Strengthening competitiveness through technical training In new countries, training efforts are more extensive than In 2003, 56% of all training courses(1) focused on the devel- in most Western countries. In Central America, following a opment of technical skills and the deepening of expertise, major investment in training in 2002, expenditure in this which are crucial to the Group's performance. area remains considerably higher than in the rest of the The University of Glass provided training courses to 125 Group, with more than 25 hours per person. Argentina and engineers and technicians from all divisions and all con- Brazil reached 55 hours of training per person. tinents in 2003, who honed their knowledge of glassmak- The Flat Glass division continued to develop its multime- ing processes in order to extend Saint-Gobain's dia training software called MKT2, designed for the initial technological edge. A glassmaking school created on the training of workers in floats, by adapting it in several coun- same model in Brazil has trained 305 participants since it tries. This system helps ensure greater consistency in the opened its doors in 1997. working practices in all factories, allowing the same man- The companies of the Building Materials Distribution divi- ufacturing quality to be obtained in all facilities. sion also seek to raise the professionalism of their teams. The divisions also continued to transfer expertise through In 2003, the Point.P School was able to train nearly 6,000 assignments of executives and on-site training. As is often attendees, thanks to the ramp-up of the Arles campus. In done when planning the commissioning of new facilities, order to provide a more structured approach to each par- several employees of the future Sekurit factory in Shanghai ticipant's skill-sets, the School has defined specific train- were sent for training to a Saint-Gobain Sekurit plant in ing curricula for each type of position. Thailand. Similarly, in Reinforcements, two Chinese engi- neers spent two weeks at Syncoglass in Belgium to enhance ■ Developing the ability to generate organic growth their technical knowledge of the weaving of glass threads Organic growth requires an innovative spirit and atten- and to gain new skills in organizing production. tion to customers' needs. To build these qualities, the train- Language skills provide the necessary support system for ing department decided to give new impetus to marketing the Group's international development. Overall, foreign lan- seminars. A new course deals with knowing and respond- guage training accounts for 8% of training hours provided ing to the needs of the end-users of Group companies' by the Group. A particularly significant effort is devoted to products and services, and a second course focuses on Central America and Eastern Europe, where languages take strategies, tools and best practices of customer relation- up 21% and 18% of training hours, respectively ship management. Similar steps are also taken at the local level. As an exam- • Training as a unifying factor for Saint-Gobain teams ple, a specific seminar on the search for customer satis- ■ Executive training faction was organized at Saint-Gobain Isover's Polish Both at Group level and within Delegations, innovative subsidiary, through theoretical teaching on the company's training programs have been designed, with the aim of positioning, followed by practical case studies. turning out executives that can motivate their teams, achieve sustainable performance and disseminate the ■ Assisting with the Group's international development Group's corporate culture. The parent company started in 2003 to organize training The first seminar on Sustainable Development, aimed par- programs on Group ways and means in the countries where ticularly at site managers, was held in October 2003. It Saint-Gobain is growing rapidly. As a first step, the "Operating fits into a policy of training leaders that are aware of all Management" seminar will be fashioned into a specific ver- aspects of management and are capable of defining a sion tailored to the needs of fast-growing emerging coun- long-term strategy. tries. The first session will take place in China in 2004. The The Company has upgraded programs aimed at young seminar will focus on the specific features of operating managers, in order to create a more relevant connection between Group-level programs and local systems, and to focus efforts on key themes for Saint-Gobain, such as work- (1) Data concerning the breakdown by subject of training hours are based on 82% of total Group staff. ing in a multi-cultural environment, leadership in an inter-

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national context and the fundamentals of management. ing the history of the Saint-Gobain Group and its Principles Alongside this reorganization of the "management devel- of Conduct and Action. For executives, there are also semi- opment" system at Group level, there has been a general nars on "Knowing the Delegation", "Knowing the Division" reworking of the programs for executives in France, to or "Getting to Know the Group in France". This entire wel- take into account the different audiences involved, with come process is specific to Saint-Gobain and will help broad- different training curricula for executives, middle man- en the awareness and corporate culture of all employees agement and site managers. to a Group-wide perspective.. In most countries, the Group continued to invest heavily in executive training in 2003. The Spanish Delegation 4. Helping people with disabilities made an outstanding contribution in this field, by renew- enter professional life ing its DOC (Development of Organizational Competencies) system, which now places greater emphasis on personal Disabled employees represent 1.8% of all Saint-Gobain development and relies on an in-house coaching system. employees, and 3.6% in Germany, 3.6% in Norway, 3.1% in In emerging countries, training efforts were even more Italy, 2.2% in France and 2.6% in Brazil(1). substantial, reflecting the Group's determination to build When an employee is affected by a new disability, Group local management. The Indian Delegation, as an exam- companies attempt, as far as possible, to keep the person ple, held a 26-day seminar in April 2003, for 26 young exec- at their job. Some 300 workstations have been adapted for utives representing more than 15% of Indian management, disabled persons, at 17.4% of Group companies(2), including that dealt with all types of management issues. Overall, 35% of French subsidiaries and 32.5% of German subsidiaries. executives were given 37 hours of training in Eastern In addition, nearly one-third of Group companies outside Europe, 46 in Central America and 57 in the Asia-Pacific the United States(3), especially in most European countries, region. lend their support to specialized institutions. By ordering from these specialized institutions, subsidiaries help bring ■ Integrating new recruits disabled employees into professional life in a setting that In 2004 the Company undertook a thorough overhaul of is specifically tailored to their situation, in terms of the the process of integrating new arrivals. Because the first nature of tasks performed, the pace at which the work is few weeks within the Group are essential to the success of carried out and especially the training received by man- new employees, a new integration toolkit, to be offered to agement teams. each new hire upon arrival, has been produced and is cur- rently being tested in Spain, the United States and the (1) Data concerning employment of disabled persons are based on 77% of total Insulation division, before being rolled out to the entire Group staff. Group in 2004. It includes a few key ingredients, such as a (2) Data concerning adapting workstations to disabled workers are based on 65% checklist for the employee's manager, a welcome booklet, of Group companies, representing 67.5% of headcount. (3) Data concerning support for specialized institutions are based on 73% of total a CD-ROM presenting Saint-Gobain products and, to be headcount and 70.5% of Group companies (86% of headcount outside the United added shortly, an Internet-based training module present- States).

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III - Environment, Health and Safety

1. The Group's policy panies and share feedback. In turn, these managers organize meetings with their own network of correspon- a) Overall objectives, translated at the local dents, which the Group EHS Director attends. As in the level operational sphere, this matrix-based organization struc- ture makes it possible to be close to business operations In its Principles of Conduct and Action (see pages 68 and and aware of specific national circumstances, while keep- 69), the Group requests that its subsidiaries "actively pro- ing a consistency with the overall objectives. mote the protection of the environment" and "take particu- Once a year, on the "Health & Safety Diamonds" awards lar care to adopt all measures necessary to ensure the best day, the sites obtaining the best results in health and safe- possible protection against health and safety risks in the ty are recognized and share their best practices with the workplace", both for Group employees and for contractors rest of the Group.This event promotes a healthy rivalry for working at Group sites. higher performance and provides an opportunity for Against this backdrop, the Company has set a number of fruitful exchanges among all participants. cross-functional objectives for the Group as a whole: Through the Group's EHS intranet portal, the entire EHS –Reaching for a rate of zero accident and zero occupa- organization can exchange information and feedback, tional illness and holding this performance; and find in one place all the in-house documents related –Controlling ever more strictly the environmental impact to the EHS policy, from the Reference Manual to the audit of each site.This means, for all Group divisions, minimizing grids, the self-diagnostic tools, presentations on current waste generation, including recycled materials in products, topics, the list of training courses offered by the Company, controlling the environmental impact of purchasing and, and more. In the event of serious accidents, the portal is for businesses that use high-temperature processes, used to roll out very rapidly all relevant feedback and les- reducing atmospheric emissions of carbon dioxide (CO2), sons learned, to prevent any re-occurrence of dangerous nitrous oxides (NOx) and sulfur oxides (SOx). situations. The integrated Environment, Health and Safety (EHS) approach provides a comprehensive overview of these three • An active contribution from the Research & inseparable subjects, leading to greater effectiveness. Development departments From this overall policy stem specific objectives in all three Saint-Gobain has two organizations that contribute to areas, that are set by the divisions, the delegations and raising the Group's environmental performance: companies with the aim of achieving regular progress, tak- – Saint-Gobain Conceptions Verrières, whose brief ing into account the constraints of each situation. includes improving the environmental performance of glass manufacturing processes, in working on furnace b) Resources deployed design. In particular, two issues are the subject of in- depth work: optimizing combustion to reduce nitrous • A dedicated structure oxides (NOx) and developing energy-saving and carbon- Environment, Health and Safety issues are handled by a dioxide (CO2) reduction processes; specific EHS structure that is matrix-based like Saint- –Research & Development teams in 16 research centers Gobain itself and coordinated by a central department and around 100 development units, which work on many reporting directly to General Management. environment-related issues. In each Division one or more persons are in charge of In 2003, research expenditure directly related to environ- designing an EHS policy tailored to the specific context of mental matters came to €11.8 million, up 7% on 2002. This the Division's operations and implementing it. Similarly, sum represents the first step in the overall Research and within each General Delegation a coordinator, working Development investment. Each of the projects funded in with a team of correspondents within the various compa- this fashion is then followed by one or more development nies and facilities, is also responsible for overseeing the programs at division level, which require at least three local implementation of Group and division EHS initiatives, times the amount invested initially. This outlay does not and for ensuring compliance with national regulations. include the full amount of research work on particulates These division- and delegation-level managers meet filters. twice a year with the Group EHS Department as an EHS Committee, to review issues of interest to all Group com-

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• Specific tools in ten countries, which for the first time included Brazil, ■ Tools made available to industrial facilities China and India. The most common recommendations The Group EHS Department has designed a certain num- concerned EHS management, technical solutions or the ber of tools that it makes available to the various sites to need for training.This program will be intensified in 2004, help them implement their own actions in line with with the setting up of a post-audit tracking process. The Group policy. medium-term aim is to audit each factory approximately The EHS Reference Manual, which stems from the Group's every three years. Principles of Conduct and Action, represents the keystone Although audits currently deal only with health and safe- of the whole system. It explains in very tangible steps how ty, a new audit grid including environmental issues was each site's management should organize operations to finalized in 2003. Several training courses on the subject ensure continuing progress: defining an appropriate poli- have taken place since the end of 2003, and pilot audits cy and setting concrete objectives, informing and training testing the new process of simultaneously reviewing employees and monitoring the effectiveness of measures environmental, health and safety issues will take place in implemented. 2004. A second tool offered by the Group is a self-diagnostic test. It is made up of a detailed list of questions and an evalua- ■ Reporting tion grid to allow plant managers to review their site's sit- Monthly reporting on safety matters, centralized at Group uation against a variety of indicators. It also includes reg- level, has been implemented for more than 90% of the ulatory and technical information, and suggested correc- Group's staff. Reporting on health and environmental tive action. issues takes place on an annual schedule, at division level. Lastly, each division develops its own tools, for example All sites subject to permit requirements, as well as those the High-Performance Materials toolkit which was issued whose operations do not require a permit but have been in 2003. This binder for facilities management provides deemed to be concerned by these issues by their division, file concise step-by-step explanations of what is involved in an the annual health and environmental reports requested by EHS management system and supplies many of the key the Company. This scope covers the vast majority of Saint- practical documents, e.g. accident analysis methodology Gobain's environmental impacts, even though it covers only and forms, examples of safety forms, workshop internal some 60% of the Group facilities involved in safety report- audit methodology, advice on drafting an annual EHS plan. ing. Progress made in implementing the policy is thus easy to measure, with an overview of results at Group level. ■ Audits A new reporting system bringing together all three aspects EHS issues are now an integral part of Saint-Gobain's of the EHS process is currently being implemented internal auditing process, which verifies the effectiveness throughout the Group. The technical software has been of risk-management processes in several operational and selected and the project was finalized in 2003, for deploy- functional areas. About 180 such audits took place in ment in 2004. 2003. They are centralized by the parent company and are performed by a dedicated team that also follows up on • Certification audit findings. If an audit highlights the need for it, an in- At December 31, 2003, 13.8% of industrial sites included in depth EHS audit is then organized. the reporting process had obtained ISO 14000 and EMAS EHS audits themselves are carried out by members of the certification, and 50.8% of them were ISO 9000x certified. EHS organization.They are an indispensable tool to obtain The Point.P and K par K sales outlets are also certified, on a a reliable assessment. They are launched at the discretion collective basis. of divisions and operating units, but also, in some cases, Certification is not mandatory within the Saint-Gobain following a decision from the parent company. The Group, as requirements only deal with implementing the Group's size enables it to perform cross-division audits, policies outlined in the EHS Reference Manual discussed with audit teams from outside the division that offer the above. Sites mainly seek certification in response to a necessary independence but also know Saint-Gobain's demand from their market, or at the subsidiary's own dis- EHS policy thoroughly. This principle seems to work well cretion with Saint-Gobain's corporate culture. Site managers accept the recommendations that are made to them, • Financial resources their results show improvements, and the auditors Capital expenditure on environmental protection has expand their own experience. been scheduled in a three-year plan, of which the first and A total of 142 Health and Safety audits took place in 2003, largest phase was executed in 2002, for a total amount of

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€70 million, reflecting a strong increase over 2001. The and safety issues involved in their daily behaviors, and of second phase of this plan was one of consolidation, which the effectiveness of the methods that are recommended explains why total capital expenditure was lower in 2003, to them. amounting to €52 million. ■ Communication This figure covers four types of investment: In a special issue of the in-house magazine on Sustainable –Protective equipment, e.g. soundproofing, dust abate- Development, all executives were reminded of how impor- ment, wastewater treatment plants, fireproof walls, waste tant EHS issues are to the Group's long-term growth. Some storage areas; delegations, the Benelux countries and India especially, –Recycling, e.g. systems for recycling raw materials, pro- have created dedicated in-house newsletters that have duction scrap, water, calories, etc. reinforced this message. But communication is especially – Economizing, e.g. equipment for reducing consumption intense at the level of sites themselves because, like train- of raw materials or energy, primary measures; ing, it is one of the keys for raising performance. Seven – R&D expenditure to optimize product life-cycles. companies entered the Communications Stars awards, the in-house award for communications initiatives, with activ- Environment-related expenses followed a similar trend to ities related to EHS issues. that of capital expenditure, though to a lesser degree, declining 11% compared to 2002, to €127 million. This c) Integrating outside contractors includes the wages of all individuals working in environ- mental protection, training costs, depreciation and amorti- The Principles of Conduct and Action emphasize that sub- zation, insurance cover and guarantees, provisions for envi- sidiaries' health and safety policy applies "to their employ- ronmental risks and all other environment-related expens- ees and to employees of outside contractors when the lat- es. Charges to provisions for environmental risks amounted ter are working on a Group site". to €4.1 million in 2003. As a result, reporting data include accidents involving these outside workers, and several years ago Saint-Gobain • Communication and training issued a specific booklet of health and safety recommen- ■ Training dations for the staff of outside companies, setting out the EHS issues represent a major focus of training efforts, as responsibilities and obligations of the client company (the training is one of the key levers for the Group's EHS policy. Group subsidiaries) as well as the duties of the outside One-fifth of all Group employee training sessions concern company. this area. Since the fall of 2003, EHS matters have been among the main themes of the "Sustainable Develop- 2. Health and safety ment" seminar for the executive leadership of Group com- panies and their closest team members. Operational The Group's health and safety policy is based on respect for managers and members of the EHS organization are the individual. It sets ambitious targets for subsidiaries, trained at division, delegation and parent company levels. namely reaching for a rate of zero accident and zero occu- The training sessions offered deal both with management pational illness. issues and with such operational questions as risk assess- This policy is implemented in several stages. Sites begin by ment, industrial health or environmental methods, audits identifying potential risks and assessing possible exposure and the resulting feedback. EHS considerations have also to these risks. They then launch corrective action, to elimi- been included in the course on "successful capital expen- nate the risk if possible (e.g. by substituting a harmless diture". product for a hazardous one or automating a handling More and more senior executives are also being trained in operation) or at least minimize it as far as possible, using management and in communication in crisis situations. protective gear, procedures or better operator training. All senior executives of the Flat Glass division in France were given specific training between June 2002 and a) Industrial health for employees: December 2003, as well as a guidebook concerning the specifically-tailored answers AGIR (Aide à la Gestion des Incidents à Risque) crisis-man- agement methodology. With high-temperature processes, the use of chemicals Training sessions for supervisors are organized locally, and and handling work that is inherent to any physical labor, these team leaders are then responsible for cascading the part of Saint-Gobain's employees are exposed to risks training to operators under their responsibility.The aim of that industrial health initiatives seek to limit as far as these programs is to make employees aware of the health possible.

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• Muscular-skeletal ailments crown. This process is based on a system of air purifica- The majority of known occupational health problems tion and distribution through a stainless-steel network. come from muscular-skeletal diseases or back pain due Operators are linked to the network through flexible to the handling of heavy weights as well as from the hoses, and a vortex apparatus clipped to their belts physical labor that is inherent to the Group's various allows them to decompress the air and lower its temper- businesses. ature very considerably, from 60°C to about 30°C (140°F to Automation at Group plants, and in some cases the use 86°F). This equipment, which allows the operator to of handling equipment, has gradually reduced the risks breathe purified, decompressed and cooled air through faced by employees. his mask, was designed with the active participation of In 2003, the Group selected a new risk-assessment masons. It is now used in five furnaces (in France, method to study handling operations, the lifting of Germany and Spain) and will be gradually rolled out to all weights and posture at workstations. Based on employee the Division's furnaces as repairs become needed. involvement, this method makes it possible to assess the operator's movements with an evaluation grid taking • Hazardous products into account each motion, its angle and width, in order to In 2004, the Group is planning to roll out best practices for identify corrective action. It is currently being distributed the management of chemical risks based on recognized eval- to all EHS managers. uation methods which have already been applied within the Group. • Exposure to dust and fibers The method that was designed and developed over the past In plants where there is a risk of inhaling dust or fibers, two years in the High-Performance Materials Sector measurements are regularly taken to ensure that legal involves drawing up a list of all products entering the site, standards are complied with. In the vast majority of regardless of their use, and itemizing all the substances cases, dust and fiber levels are well below the maximum that they contain. These substances are then classified into allowed by law. three categories,based on their degree of toxicity.Exposures Lapeyre plants in France continued to implement their are analyzed and split into three levels: work in a closed dust abatement plan in 2003. By redesigning several environment (no exposure), presence of an effective pollu- sites, they were able to ensure that no employee is tant trap, or no collective protection system (individual pro- exposed to more than 5 mg per cubic meter of inhalable tective gear required). Cross-referencing the level of haz- dust, the aim being to eliminate any exposure to more ardousness with the degree of exposure yields a measure- than 1 mg per cubic meter by 2005/2006. Alongside these ment of risk, against which the necessary measures can be preventive steps, a medical monitoring agreement has taken,such as product substitution or investing in collective been drawn up with the plant doctors of the sites protection equipment. involved, to set up extra surveillance for individuals Lapeyre's policy on preventing risks from hazardous prod- exposed to wood dust. ucts has now reached a consolidation phase. All EHS man- Beginning in 1996, the Ceramics & Plastics Division devel- agers have been trained in knowing and assessing such oped a dust abatement plan for crystalline silica, based risks, and now common tools are being provided to all on strict methodology, which it applied first in Europe, industrial sites concerned, to allow assessment of risks and then worldwide. Samples are taken at all high-risk work- management of those hazardous products for which no stations, such as transportation of loads, grinding, pol- substitution was possible. ishing or maintenance, in order to assess exposure levels. In the Flat Glass division, hazardous products are likely to be If these samples are higher than 30% of the legal thresh- used in the composition of the glass itself or for surface old, very precise recommendations are issued to the facil- treatments that increasingly serve to give the glass its added ity concerning collective safety equipment, substituting value, such as enameling, magnetron, chemical vapor depo- products for certain applications or other steps, and a sition, high-temperature pulverization. Studies have been new evaluation is planned within two years. carried out early on in the development process in conjunc- After having assessed risks, the Flat Glass division tion with the R&D centers, to minimize exposure to haz- designed specific equipment, through cross-functional ardous products and environmental impacts. The Division work, to protect employees during the firing up of fur- endeavors to replace hazardous products with less toxic naces. During this type of work, exposure to silica dust substitutes. As an example, lead is gradually being elimi- (and to a lesser degree to fibers) can rise to high levels nated from enameling processes. Other possibilities are and working conditions can become extremely difficult also being considered, for example ways of making a prod- due to excessive heat, particularly near the furnace uct harmless through prior vitrification, using glass frit.

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• Noise severity rate (SR, number of person-days lost as a result of Noise-related issues are managed locally. Site managers disabling injuries per thousand person-hours of exposure) decide on investments in collective protection equipment. fell to 0.37, down 10%. For the first time, these data include In the Flat Glass division, the practice of placing noise- the Building Materials Distribution division. proofing enclosures on glass before breaking is now very Performance has deteriorated slightly in this Division, with a broadly established. In several subsidiaries, molded silicone rise in LTI/Ds to 17.6 from 15.7 and an increase in the severity hearing-protection equipment is produced for each opera- rate from 0.47 to 0.50. This lower performance was partly due tor. These hearing aids filter out the noise from machines to a change in reporting scope, as all the Division's sites were but still allow operators to communicate verbally with systematically included in 2003. Setting up safety manage- their colleagues. ment functions throughout the division is one of the priorities for 2004 in the Building Materials Distribution Division. This • Biological risks will be made easier thanks to the use of many Group tools Several Group companies launched preventive action in that can be tailored to the specific needs of this business line, this field in 2003. A day of training was provided to such as reference manuals and audit methodologies. Lapeyre Lapeyre EHS managers, giving them all the tools they began this policy in its sales outlets in 2003, training man- need to assess risks at their facility and begin imple- agers and launching a risk-assessment process. menting preventive action. In the Flat Glass division, a Industrial facilities have confirmed their continuing perform- detailed risk assessment was produced, with specific ance improvement. In the industrial divisions, the incidence recommendations that gave rise, in 2003, to the drafting rate of injuries with lost workdays fell 16% over one year, to 8.5 of an in-house reference document on the subject. in 2003, and has been divided by more than three in ten years. Lastly, following the outbreak of an epidemic of The severity rate has followed a similar trend, with a 17% Legionnaire's disease in France at the end of 2003, the improvement compared to 2002 and a 50% improvement Group asked all facilities in the country which could be since 1993.Thirty-three factories have even reached or exceed- at risk to take preventive measurements of legionella ed a million hours worked without a lost-time injury caused by bacteria, with the instruction of contacting local author- an accident.Among the industrial divisions,only Flat Glass has ities in case of abnormal results. an incidence rate that remains higher than the Group aver- age, particularly due to handling and glass-cutting operations b) Safety: significant progress, but still not in its subsidiaries producing glass for the building industry. enough The Division has nevertheless recorded a 23% improvement in this incidence rate. The incidence rate of injuries with lost workdays (number Most Delegations have recorded improved results, except the of lost time injury/days, or LTI/Ds, for every million hours Nordic countries that had experienced remarkable progress in worked) for 2003 was 11.0, down 6% from 2002, and the 2002 and France because of the strong presence of the Building Materials Distribution division and the latter's full inclusion in the scope of reporting in 2003. Nevertheless, the

▼ Changes in Incidence Rate of Injuries with incidence rates and severity rates of French industrial facilities Lost Workdays (LTI/D) and Severity Rate (SR) have fallen very significantly thanks to the measures taken – Group and Industrial Sites (Actual Structure) over the past two years and to the use of systematic audits. LTI/D SR 35 0.80 Brazil, the Asia-Pacific region and India have reached LTI/Ds of 0.77 less than 5. India's very proactive policy has borne fruit, with a 30 32.5 0.70 50% fall in its incidence rate and a severity rate that is now the 0.60 25 lowest in the Group. Other remarkable improvements in 0.50 LTI/Ds came from Central America, Germany and Italy, which 20 0.40 0.37 0.40 recorded decreases of 50%, 30% and 25% respectively. 15 0.36 0.33 11.6 0.30 The Group deeply regrets ten fatal accidents and one case of 11.0 10 heart failure in 2003, involving nine employees and two sub- 10.1 0.20 8.5 contractors working at Saint-Gobain sites. Of these accidents, 5 0.10 five took place in industrial situations – including four during 0 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 maintenance operations – and the five others were road acci-

Change in SR, industrial sites, Change in SR, Group, dents. For 2004, Group EHS management has specifically 1992-2003 2002-2003 requested that all action plans emphasize raising awareness Change in LTI/D, industrial sites, Change in LTI/D, Group, 1992-2003 2002-2003 concerning the risks of road traffic and maintenance operations.

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In-house procedures for responding to such fatal accidents country to the next. Storage sites are systematically man- were further tightened in 2003.The Group EHS manager or his aged under special conditions and compliance with the deputy goes to the site of the accident to review its circum- "Seveso" directive gives an additional focus to the facility's stances, and this procedure will now be directly overseen by EHS policy. Group or Division-level General Management. An in-depth analysis of these accidents is published on the EHS portal, so that facilities can immediately make use of the feedback that the accidents have caused.

▼ Location of “Seveso” classed sites 3. Environment

Vamdrup Saint-Gobain's industrial operations pose relatively few (Insulation) technological risks. For the most part they process inor- Phenol/Formaldehyde ganic materials and require practically no explosive or environmentally hazardous substances. In fact, one third Hyvinkää of the Group's sales comes from the distribution of build- Mers-les-Bains (Insulation) (Containers) ing materials, a labor-intensive service activity that poses Phenol/ H2 /O2 Formaldehyde very few environmental risks. One of the key focuses of the Group's environmental poli- cy concerns optimizing the use of materials in its indus- trial processes. This involves controlling industrial waste, Conflans promoting in-house recycling and building end-of-life (Abrasives) Phenol-based recyclability into products. Air pollution from the melting resin processes required to produce glass, cast-iron pipes, and some industrial ceramics is another of Saint-Gobain's concerns. These processes take place in furnaces where temperatures exceed 1,500°C (2,700°F), drawing upon sub- stantial energy consumption and causing emissions of Bagneaux Azuqueca (Flat Neuburg carbon dioxide (CO2) and other atmospheric pollutants (Insulation) Glass) (Containers)

such as nitrous oxides (NOx) and sulfur oxides (SOx). Phenol/ As2 O3 LPG Formaldehyde Lastly, the Group is watchful about managing its impact on natural balances, in the way it uses soils and in its sourcing policies. In the United States, the Lake Charles site is subject to sim- a) Limited and controlled industrial risks ilar legislation due to its use of vinyl chloride to produce PVC pellets used as raw materials for some of CertainTeed's • Three levels of risk construction materials, e.g. sidings, windows or garden ■ Eight sites subject to specific regulations furniture. This site is regulated by both the Risk At December 31, 2003 seven facilities were regulated Management Program Rule (RMP Rule) and the Emergency under France's "Seveso" legislation implementing the Planning and Community Right to know Act (EPCRA). European Directive of December 9, 1996 on "controlling risks related to major accidents involving hazardous sub- ■ Sites subject to permit requirements stances." The Directive calls for specific legislation to reg- Most of the other industrial facilities are subject to permit ulate facilities deemed to involve industrial risks. Three of requirements (administrative authorization in France) these sites were concerned by the lower threshold and and must first and foremost comply with the terms of four by the upper threshold, relating not to their manu- their permit. facturing processes, which are free of major industrial risks, but to the storage of explosive or toxic materials. ■ Other sites A study conducted in 2003 by the Group EHS Department Sales outlets of the Building Materials Distribution divi- showed that procedures and methods implemented by sion as well as smaller-sized industrial sites or plants that the various sites concerned were consistent from one pose no significant risks – mainly the processing sub-

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sidiaries of the Flat Glass division and various sites of the accounted for 44% of the Group's glass production. The Building Materials division – do not require a permit and Containers and Insulation divisions continued to raise the therefore only need to address local community concerns. proportion of recycled materials used in their products, but the use of cullet is limited by technical constraints in the Environmental disputes case of reinforcement fibers or glass for flasks and for the In 2003, the Group did not have to pay any court-ordered building and automotive industries. damage settlements related to environmental matters. A few steps were taken to remedy environmental damage ■ Pipe that had been caused, essentially the cleaning up of land- The Pipe Division uses two types of melting processes. In fills and the remediation of industrial sites. the first, known as "primary smelting", cast iron is obtained in blast furnaces, from iron ore. In the second b) Optimizing consumption of materials process, known as "secondary smelting", the cast iron is produced from scrap metal and recovered cast iron, melt- One of the key focuses of the Group's environmental poli- ed in cupola furnaces or less powerful furnaces. The cy is to make better use of materials by minimizing con- choice of process depends on the types of markets served, sumption of natural materials and promoting the recy- the requirements of specific products, scheduling, market cling and reuse of waste products. prices of primary and secondary raw materials, etc. In 2003, as a result of the major water-supply contract with • Controlling consumption of raw materials Abu Dhabi for large-diameter pipes, primary smelting Consumption of raw materials has to be addressed differ- took the lion's share, and the Division consumed 60% of ently for different types of operations. The paragraphs new materials and 40% of recycled materials. that follow list only Group sectors that consume a signif- In addition, the Pipe Division has focused a large part of its icant amount of non-renewable raw materials Research & Development efforts on optimizing the use of cast iron in its finished products, through continual ■ Glass Sector enhancement of the centrifuge process and by designing Glass sector businesses mainly decrease their consump- ever-lighter pipes, and on controlling the amount of mate- tion of raw materials by introducing cullet in their process- rials used for internal and external coatings on its prod- es. In 2003, the Glass sector consumed 12.95 million metric ucts. For connectors, a process of coating by cataphoresis tons of new materials and 6.2 million metric tons of cullet guarantees excellent regularity in the layer and keeps the (produced both in-house and externally). Glass melted amount of product used to a minimum. For the inner from cullet (produced both in-house and externally) coating of pipes, a new process, currently being tested in Germany, will also allow savings of 20 to 30% in the amount of cement used.

▼ Main raw materials • Minimizing waste and improving its recycling or reuse used in glassmaking Group companies produce three types of waste: Other –For several divisions, production scrap can be returned Limestone, dolomite into the manufacturing cycle fairly easily, since glass and 6% cast iron are recyclable materials. 12% – Non-hazardous commercial waste is increasingly recy- Sodium cled or reused. Used sand serves in cement kilns, slag from carbonate 11% 36% Cullet blast furnaces or cupola furnaces is used as public works filler material, PVC waste can be included in lower-quality plastics, etc. – The main types of hazardous waste produced are the fol- lowing: • Dust resulting from the melting of glass, made up of 35% sulphates and possibly containing heavy metals, is col- Sand lected at the bottom of regenerators or in furnace flues, as well as in fume filters. .

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•Waste from the demolition of furnaces, composed prin- organization AERES, the Association of Companies for cipally of used refractories. Reducing the Greenhouse Effect, the Group has undertak- When such waste is not recyclable, it is disposed of by spe- en a voluntary commitment to reduce its CO2 emissions cialized professionals that also handle paints, solvents or per ton of manufactured product by 15% by 2010, against used motor oils. a 1990 baseline. In all, the Group generated 1.8 million metric tons of waste In Europe, it is preparing for the introduction of emission in 2003, of which 31% were recycled or reused outside the quotas, which will concern some 80 factories in their first Group and 68% were landfilled(1). phase. The Group is actively involved in the negotiations The Group will be devoting particular attention over the on quota allocation and is pursuing exchanges of infor- coming years to ways of reducing the amount of land- mation and feedback among the different countries. In filled waste. France, Saint-Gobain has also chosen to take part in test- Not only will Group companies be expected to pursue ing the national emissions registry designed by Caisse des continual progress in this area, each according to its own Dépôts et Consignations. constraints and opportunities, but in 2003 Saint-Gobain In 2003, Saint-Gobain emitted 10.8 million metric tons of also launched a number of framework agreements by CO2, of which more than 90% came from glass melting country with solid-waste management specialists. In operations and the Pipe division. Emissions from glass addition to streamlining the management of waste, the furnaces, which today represent an average of 581 kg of purpose of these contracts is to set up new avenues for CO2 per metric ton produced, have already decreased by recycling or reuse. The renewal of contracts in this area 9.1% in relation to 1990. Emissions per ton produced can will be partly determined by each provider's search for vary according to the type of glass manufactured, from and development of avenues for improvement. In 503 kg in Containers to 940 kg in Reinforcements. As part Belgium, where this system was set up as early as the of the AERES agreements, emissions from the Flat Glass summer of 2003, new recycling options have been put in Division in France have been independently reviewed by place.These early results lent support to the plan of devel- Ernst & Young. The Pipe Division, which in 2003 emitted oping the framework agreements, which are about to be 1.04 metric ton of CO2 per ton of cast iron produced, has signed in France and in the Netherlands, and are being for several years assessed its French sites using the carbon negotiated in Germany, the United States and Spain. balance sheet methodology applied by the French steel In its new environmental policy, the Insulation Division federation (FFA). has made waste minimization a priority. The Division In fulfilling the overall objective that it has set, the Group requires its subsidiaries to reduce both the amount of allows its subsidiaries to choose the most appropriate mineral wool scrap they generate, through better efficien- means of reducing their own emissions, which in all cases cy, and the quantities landfilled, through greater in-house come from the burning of fossil fuels and, to a lesser recycling. In the Reinforcements Division, the Italian com- degree, from the decarbonation of raw materials. pany Revetex has specialized in finding uses for scrap Including recycled materials in production processes is a from glass threads which, due to technical constraints, are first emissions-reducing method. In glass operations, 255 difficult to re-inject into the production process. Uses to 300 kg of CO2 emissions are avoided for each ton of cul- have been found as reinforcements for road surfaces, san- let used. Most Group companies are also on a drive to itary ceramics or even certain types of thermoplastics. reduce their energy consumption, through setting up heat-trapping systems, or through optimizing the design c) Limiting atmospheric emissions and yield of furnaces, or the volumes of raw materials melted at one time. • CO2 emissions and energy consumption On average, producing one metric ton of glass requires A priority focus of Saint-Gobain's environmental policy for 2,540 kWh and a metric ton of cast iron takes 3,710 kWh. the Glass Sector and the Pipe division is to minimize car- The Glass Sector's total energy consumption in 2003 bon dioxide (CO2) emissions and to reduce the energy amounted to 35,500 Gigawatts/hour (GWh), 6% more consumption of its furnaces – the two objectives being than in 2002, because of a 7% increase in the total volume inseparable. In line with its membership of the French of glass produced. Fuel oil and natural gas are the main energy sources. Electricity serves as the main energy source for 50% of the furnaces of the Insulation division, and serves as a backup power source for the other divi- (1) Data concerning the breakdown between recycled or reused waste and land- filled waste are based on more than 80% of the waste produced. sions.

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Within the Housing Products Sector, the Pipe Division con- but the economics of this technology make it difficult to sumed 6,360 GWh, 18% more than in 2002, mainly apply to Flat Glass or Containers. because it expanded its total output of cast iron, and also Saint-Gobain is today one of the world's best performing due to the increased use of primary smelting for its major industrial groups for the reduction of nitrous oxides export contracts. The main energy sources for this through primary measures. Division are coal coke (in blast furnaces and cupola fur- The Glass sector emitted a total of 35,000 metric tons of naces), but also electricity and natural gas. NOx in 2003, through a variety of production processes In the High-Performance Materials Sector, total energy that discharged from 1.21 kg per metric ton of glass pro- use, mainly for making silicon carbide and fused-cast duced in Insulation to 3.95 kg per ton in Reinforcements. refractories, came to 3,700 GWh, up 5% on 2002. The manufacturing of cast iron products caused the release of 1,150 metric tons of NOx, representing 0.75 kg • Emission of substances causing acid rain and nitrifica- per ton of cast iron produced. tion Saint-Gobain factories emit two types of substances that • Emissions of substances causing photo-chemical pol- cause environmental acidification, sulfur oxides (SOx) lution produced as a result of burning fuel oil and coke and The Group emits two types of substances that cause nitrous oxides (NOx) that are produced through high- photo-chemical pollution: nitrous oxides (see above) and, temperature oxidation of combustion air and also cause to a lesser degree, volatile organic compounds (VOCs), nitrification. The sources of such emissions are mostly the which are created in certain product processing and fin- Glass Sector and the Pipe Division. ishing phases of specific operations. Following or anticipating on increasingly strict legal VOCs are by-products of the various organic substances requirements, the divisions concerned have been reduc- used for bonding of fibers and glass wool and sizing of ing their emissions of SOx for several years through the abrasives (phenol and formaldehyde), for production of use of higher-quality fuel oil or coal, but also by reducing silicon carbide (particularly polycyclic aromatic hydrocar- their energy consumption or setting up desulfuring bons), for asphalt roof shingles (formaldehyde), as sol- processes. vents used in coatings for cast-iron pipes, or in various The Glass Sector emitted a total of 24,000 metric tons of products for wood protection and finishing at Lapeyre. SO2 in 2003, down 11% compared to 2002, thanks to the Releases of VOCs to the atmosphere generally entail a use of less sulfur-rich fuels or by switching to natural gas. chemical risk for employees, therefore the increasingly Emissions per metric ton of glass produced varied accord- common use of chemical risk assessments will allow the ing to the manufacturing process used, from 0.8 kg in Group to study these emissions thoroughly, then to Insulation to 1.8 kg in Reinforcements and Flat Glass. The implement corrective action for reducing them. Pipe Division emitted 480 metric tons of SOx in 2003, rep- In the High-Performance Materials Sector and in Lapeyre resenting 0.42 kg per metric ton of cast iron produced in plants, such analyses have already led to the substitution primary smelting and 0.10 kg in secondary smelting. of a certain number of hazardous products. The Pipe Group companies have been endeavoring to reduce their Division has designed solvent-free coating processes that NOx output for more than ten years, by focusing on pri- use epoxy powder for taps and connectors, cataphoresis mary measures that eliminate or at least limit the gener- for connectors and, beginning in 2004, autophoresis ation of these NOx gases, as opposed to secondary meas- chemical coating for supplies for roadworks and utilities. ures that require the consumption of reagents or addi- When using solvent-free paint is not an option, particu- tional energy. As an example, the FENIX (a French acronym larly for pipes, the solution lies in installing VOC-trapping for "low NOx emissions", Faibles Emissions de NOx) equipment then oxidizing the VOCs on the manufactur- process applied in the Flat Glass division mainly involves ing line. optimizing combustion conditions within furnaces. The French ministerial order of 2003 on the glassmaking • Dust emissions industry also highlights primary measures, by prescribing The Group is also involved in an active dust-abatement drive. thresholds that these processes can reach. Particularly for its Glass operations, the Group has decided to Oxygen furnaces sometimes provide another interesting use as a reference the new French standard (administrative alternative since by displacing nitrogen in combustion air, decree on the Glass industry dated March 12, 2003) and to they cause far less NOx emission. In Reinforcements, for adapt it where possible to the constraints faced by other example, nearly 30% of furnaces are now oxygen furnaces, Saint-Gobain facilities throughout the world.

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All Glass Sector furnaces and manufacturing lines generated phonolite, dolomite, limestone and feldspath. In the a total of 6,200 metric tons of dust, which amounts to an United States, the Group extracts rhyolite, which is used to average of 0.45 kg of particles per metric ton of glass pro- make roof shingles and novaculite, a hard stone used for duced. In 2003, the Pipe Division produced 920 metric tons of its abrasive qualities. Other extracted minerals are quartz dust, or 0.54 kg per ton of cast iron produced. in Brazil, used in the making of mortars, and aggregates and gravel in France, for making tar and concrete. • Heavy metals In all these countries, materials are mined in accordance Other hazardous substances emitted by the Group with applicable regulations. These operations are wholly include heavy metals from impurities in raw materials ancillary, as the total amount of sales outside the Group used, particularly cullet. Although the quantities involved accounts for less than 0.02% of Group sales. are small, monitoring is necessary and is being extended to all sites. Increasingly, dust particles from filtration, • Purchases of tropical wood which sometimes contain traces of toxic metals, are recy- The Building Materials Distribution Division purchases over cled in furnaces or through appropriate channels. Only 1.5 million cubic meters of wood, of which tropical woods final waste that cannot be recycled is landfilled. account for less than 8%. Several of the Division's compa- nies have embarked on policies based on controlling their • Noise and smells purchases. Disturbances for neighbors of Group facilities in terms of In the United Kingdom, Saint-Gobain Building Distribution noise or smells are very limited and are managed at the local UK (SGBD-UK) is a co-founder of the "Forests Forever" NGO, level. If a specific problem arises, solutions can generally be a member of WWF1995+ and a signatory of the Timber found through dialogue with the local communities. These Trade Federation's charter. The company has set two solutions can sometimes be as simple as a change in road goals: to ensure that its suppliers comply with applicable traffic plans at the site. regulations and to develop on an ongoing basis its pur- chases of certified wood. SGBD-UK has decided to discon- d) Limiting impacts on natural balances tinue its purchases of Indonesian plywood, due to doubts about its origin, and estimates that more than 40% of its • Fauna and flora wood-paneling products come from sustainable and cer- The Group's main impacts on its environment come from tified sources. The main difficulty in raising this percent- atmospheric emissions, energy consumption and waste age comes from the fact that there are still only a few cer- generation, but Saint-Gobain plants generally do not pose tified providers. In addition, in 2003 19 SGBD-UK sales out- any threat to local fauna and flora. Impact studies are nev- lets obtained "Chain of Custody" certification guarantee- ertheless performed in most countries prior to the siting ing the traceability of their wood products. of a new industrial facility. Eight Lapeyre industrial carpentry factories process wood, 30% of which comes from tropical deciduous trees. The • Soils Lapeyre group is committed to protecting forests and has ■ Contaminated soils implemented a sourcing policy that gives priority to wood Whenever a site is acquired or disposed of, regulatory from managed or certified forests. A forest is certified compliance tests are conducted and the quality of when it is managed in accordance with internationally groundwater is monitored. If any contamination is detect- recognized rules designed to protect the natural environ- ed, appropriate measures are implemented. For example, ment. Such rules define very specific conditions of opera- the Ceramics & Plastics Division discovered a landfill on tion based on essences, climate and soils, such as the min- the Japanese site of Toshiba Monofrax when it took it over, imum diameter of trees for cutting, the maximum yield of and it took all necessary measures to protect the environ- a plot, replanting requirements, steps to protect fauna ment at the site, notably by stabilizing the surface and and flora, and more. Between 2001 and 2003, the propor- covering it. tion of wood from managed or certified forests rose to 72% from 55%. It is expected to reach 80% in 2004, mainly ■ Quarries as a result of replacing non-certified native essences with The Group manages 37 quarries in France, the United managed essences like pine and eucalyptus. Lapeyre also States, Brazil, Italy, Spain and Portugal, from which it contributes to developing certification in Brazil through extracts raw materials for glass manufacturing, such as its membership of the Board of Directors of the Forest silica sand – the main ingredient in glass – , but also Stewardship Council (FSC) and of the related buyers' club.

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Factories are also reducing their use of forest wood water, 89% of which was used in glass furnaces, the Pipe through better use of the raw materials, by developing the Division and the High-Performance Materials Sector. Each use of reconstituted wood and enhanced gluing process- metric ton of glass melted requires 2.1 cubic meters on es. At December 31, 2003, two Lapeyre plants had received average, with a range that goes from 1.1 cubic meters to certification from the FSC and one from the PEFC (Pan- 12.5 cubic meters in the particular case of the European Forest Certification Council), which allowed Reinforcements division. In Reinforcements, the bonding Lapeyre to market its first certified finished products, process demands heavy water inputs, as chemicals dis- which were stairs in Brazilian tauari and Scandinavian solved in water need to be deposited on glass fibers to pine. give them all the required properties.The Pipe Division, for Lastly, 8% of Point.P's wood imports come from Brazil or its cooling processes, consumed 20.1 cubic meters of water Africa. The Brazilian imports come from Lapeyre's local sub- per metric ton produced in 2003, reflecting a 12% drop sidiary, while for purchases of African wood the company from 2002, the result of major programs to improve water has set up a partnership with Greenpeace that gives it bet- management and reduce consumption. The new ter control over its purchasing, which it directs as a first pri- Archimedes cement-application process that is currently ority towards suppliers that comply with local forestry reg- being tested in Germany will allow not only the savings of ulations and commit to a code of ethics. raw materials mentioned above, but also a substantial reduction in the amount of water needed to coat the • Controlling consumption of water and limiting effluent inside of pipes and in the volume of effluent generated. Practically none of the Group's manufacturing processes The High-Performance Materials Sector used 14.3 million use water as a raw material. However, it is used in large cubic meters of water in 2003, up from 11.4 million in volumes for cooling high-temperature processes. In most 2002. cases, this cooling water is recycled internally, which helps Liquid effluent to be discharged is generally treated prior limit actual consumption considerably. to being re-injected into the municipal network or natural In 2003, the Group consumed 87.3 million cubic meters of environment from which it came.

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IV - Answers to overall sustainable development issues

1. Buildings that protect the environment insulation of buildings from outside or Lapeyre’s window fittings are increasingly effective for eliminating thermal Saint-Gobain produces building materials that, once channels. installed, save far more energy than was required for their manufacturing. They therefore contribute significantly 2. Materials for renewable energy both to energy savings and to reducing overall emissions of greenhouse gases. Such applications from the Flat Glass The Pipe Division has a small business line that supplies and Insulation divisions generate 11% of Group sales. pipes for the Norwegian market of micro hydraulic plants, Low-emission double glazing offers three times better and this is one among many products and R & D projects thermal insulation than standard double glazing, thanks that contribute to the growth of renewable energy sources. to an invisible metallic layer applied to one of the two glass The Group manufactures glass threads and fabrics for panes, which acts as a thermal barrier. It has been estimat- reinforcing wind turbine blades. Because these blades ed that applying this double glazing to all residential hous- have very precise specifications and require leading-edge ing in Europe would save 82 million metric tons of carbon quality and reliability, reinforcing them is a demanding dioxide (CO2), representing 9% of emissions from housing application with high added value, for which glass threads sources and 2.7% of total European emissions. For house- offer an optimal solution. Saint-Gobain's sales in this area holds, the cost of this installation is recovered in less than already amount to €27 million, as the Group continues to two years thanks to savings on their heating bill. support the rapid development of this market, which has Considering that glazing has a useful life of about 30 years, grown by 27% per year over the past ten years and should these gains add up to a substantial amount for the user.The be ten times its current size by 2020. use of this type of glass should receive a boost from efforts In the field of solar energy, the Group offers glass panels to ensure compliance with the Kyoto Protocol. for glass solar cells, which in Europe account for 90% of Sun-control glass can also be included in the low-emission the market for thermal solar energy.These flat cells, made double glazing, to keep temperatures down in the summer. up of a rectangular box lined with absorbent material and Mineral wool is similarly efficient. It is estimated that with- covered with a glass pane causing a greenhouse effect in one month of insulating a house with glass or rock wool, within the box, transform solar radiation into household the household has saved an amount of energy consump- hot water or heating at the level of an individual building. tion and CO2 emissions equivalent to what went into mak- The total installed surface in Europe now amounts to ing the product. approximately one million square meters, but could reach In all, 36 million metric tons of CO2 emissions would be 10 million sq. m. by 2010, thanks to the incentive policies avoided if all French residential housing and service-sector implemented by governments. business facilities were suitably insulated with mineral Solar energy can also be converted into electricity through wool and double glazing with reinforced thermal insula- photovoltaic cells assembled in modules with transparent tion. conductive glass. Each square meter of such modules Saint-Gobain materials also contribute to the soundproof- installed anywhere in the world requires between one ing of buildings. Saint-Gobain Isover supplies specific sys- and three square meters of glass, depending on the type tems for multiplex cinema complexes, while Ecophon and of cell and the encapsulation process used. Such modules, Eurocoustic acoustic ceilings meet the challenge of bring- which can be set up in buildings, in cities, or in mobile ing better acoustics to classrooms and activity rooms while applications, require very specific properties of great reducing overall noise levels. Saint-Gobain Glass also transparency, optimized transmissiveness and the ability received the Golden Decibel Award for 2003 in France, for to weather outdoor conditions. Saint-Gobain Glass has its new thermal and acoustic double glazing that offers designed two specific qualities of glass that meet these excellent soundproofing while remaining thin and light. specifications, the extra-clear "Diamant" glass and the Some products made by other Group divisions also con- "Albarino" textured glass which maximizes light trans- tribute, though to a lesser degree, to better insulation of mission through a geometric effect. In Germany and buildings. Saint-Gobain Weber's wall facings for thermal Spain, Saint-Gobain Glass Solar assembles solar cells for

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making custom-designed photovoltaic modules for use in gives its clients the benefit of its up-to-date knowledge of architectural projects. these bodies and their procedures. Driven by government incentives, technical progress and Overall, the drinking water supply and wastewater mar- falling costs, the photovoltaic glass market, which repre- kets account for 6% of Group sales. sented about 4 million sq. m. in 2002, could reach 16 mil- lion sq. m. in 2010 and, according to some estimates, 100 4.Recycling or reusing products at the million sq. m. in 2020. end of their life-cycle Lastly, the Reinforcements and Ceramics & Plastics divi- sions are currently taking part in feasibility studies on the Most of the materials produced by the Group are recycla- production of fuel cells for cars. These divisions could be ble, especially glass and cast iron, which makes them envi- producing several parts of these clean-burning motors of ronment-friendly. Among the various services which the future, including ion-exchange membranes, electrodes Saint-Gobain offers its professional customers, recovering made of conductive composites and other components and processing materials at the end of their life-cycle is more and more in demand, since customers are now 3. Water supply materials in developing aware of the cost and complexity that landfilling these countries materials will soon involve. In the Ceramics & Plastics Division, Valoref is already the By their very nature, the products of the Pipe Division con- European leader for recycling decommissioned glass fur- tribute to sustainable development, by making it possible naces. The company's all-inclusive offerings include selec- to carry drinking water and to evacuate waste water. The tive demolition of furnaces, on-site sorting and removal of Division's first area of expertise was in the setting up of demolition waste, as well as advice and technical assis- urban drinking water networks. Over the past twenty tance. Each of its projects is based on extremely strict years, a new application has appeared. As the urban cen- specifications, drawn up in close partnership with the ters of developing countries expanded, their water supply industrial client. The company then offers its clients a full had to be sought further and further afield. The Division range of secondary raw materials or manufactured prod- produces large-diameter pipes, of up to two meters, that ucts. Valoref has successfully recycled most types of are used to ship drinking water over dozens, or even hun- refractories, regardless of their nature, quality or level of dreds of kilometers, to major cities. In many countries, pollution. In 2003, the company processed 31,500 metric such pipes meet an essential need. Saint-Gobain PAM has tons of waste, with a 55% rate of recycling or reuse. won approximately ten major contracts in the Middle Consumption of cullet from in-house and external East, Latin America and Africa, for distances ranging from sources accounted for 42.6% of production in the 43 km in El Salvador to 138 km for the water supply of Insulation Division and 54.1% in Containers. It is estimat- Dakar, and involving up to 400,000 metric tons of piping ed that nine out of ten champagne bottles are produced (for the Suweihat project in Abu Dhabi). from recycled glass. To meet its needs for cullet, the Group The Group's products are particularly well suited for this partly draws upon external sources. It has five glass-pro- new application, because cast iron is an exceptionally safe cessing centers, in France, Germany and Italy, which most- and durable material, as hundred-year-old pipes in Prague ly supply the furnaces of the Containers Division. In 2003, or Montevideo attest, requiring very little maintenance Saint-Gobain directly processed more than 700,000 met- and which can be set up in all types of soils. In addition, ric tons of cullet. Glass recycling is limited by the ability to because of their coupling design, Saint-Gobain pipes recover "clean" cullet that is free of contaminants. In require very little technical skill for their installation. France, Saint-Gobain Glass designed a new line of enam- The Division makes available to its client local govern- eled glass in 2003, which contains no heavy metals and ments the services of its financial engineering depart- can therefore be recycled easily without introducing any ment, that assists them in dealing with banks, insurance contaminants. The Reinforcements Division decided in companies and other financial institutions in order to 2003 to take part in setting up the European Recycling seek and coordinate financing for such projects. This Company (ERC), a company bringing together expertise department also maintains an active presence with major from several different industries to develop and promote global financial providers such as the World Bank, region- methods for recycling composite materials. This service al development banks and European or Arab funds and would meet a genuine need for industrial clients. Similar

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projects are currently being worked on in the Group's Saint-Gobain Sekurit's sunproof windshields are covered other industrial divisions. with a reflective metallic layer and include a sheet of In Building Materials Distribution, approximately 10% of absorbent PVB. Compared to a standard windshield, they Point.P outlets include waste recovery centers, where allow savings of 20% on air conditioning and 3% on ener- tradespeople can dispose of their construction waste gy consumption. In a standard configuration, such a wind- before loading up their trucks with new construction shield reduces CO2 emissions by 200 kg every 100,000 km. materials. This ancillary service has also helped give Approximately 21% of European vehicles are currently fit- Point.P a competitive edge. ted with this type of windshield. Further, the thin automotive glass now entering the mar- 5. Materials for clean technology ket is lighter than traditional glass and helps car manu- facturers meet their objectives of producing lighter vehi- Glass threads serve to make composite materials, which cles that consume less fuel. are widely used in vehicle dashboards and interiors. Lastly, the Group has a 35% stake in a joint venture with Thanks to their lightness, which saves fuel and reduces the Japanese company Ibiden, that manufactures particu- CO2 emissions, in addition to their rustproof properties late filters for diesel engines. Alongside strategies for and high resistance, these composites meet the highest advanced control of motor settings, these highly effective standards for performance, safety and environmental filters are helping to break new ground in improving the soundness. environmental performance of diesel engines.

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Risk Management

Market risks: interest-rate, Interest-rate risk foreign currency and credit risks Interest rate risk relating to the Group's total net indebt- Liquidity Risk edness is managed by the Treasury Department of Compagnie de Saint-Gobain. Net indebtedness is deter- In 2003, Saint-Gobain scaled back net debt further from mined by means of a reporting system in which sub- €7 billion to €5.7 billion. sidiaries provide a breakdown of debt between long- and short-term and fixed and variable rate, together with The average life of its borrowings continued to lengthen, details on interest rates and hedging instruments by line with long-term debt increasing from €6.2 billion to €6.5 of debt. Subsidiaries hedge risks on debt exclusively with billion in 2003.This rise would have been more significant Compagnie de Saint-Gobain, the Group parent company. excluding the impact of the conversion into euros of US dollar denominated debt. Additionally, €152 million worth The main objective of managing overall interest rate risk of bonds reached maturity during the year and in April on the Group's consolidated net debt is to fix the cost of the Group issued€1 billion worth of new bonds maturing the medium-term debt and to optimize annual borrow- on April 16, 2010. As of year-end 2003, substantially all of ing costs. The Group's policy defines which derivative the Group’s long-term debt was composed of bond issues, financial instruments can be used to hedge the debt. amounting to €5.7 billion. The remaining amount com- These instruments may include rate swaps (either in the prised private issues, medium-term notes, perpetual loans same currency or cross-currency swaps), options and for- and finance leases. ward rate agreements.These instruments are traded over- the-counter with counterparties meeting minimum rat- At the same date, the Group’s short-term debt totaled ing standards as defined in the Group’s financial policy. €2.2 billion, versus €2.1 billion a year earlier. It mainly con- sisted of bank overdrafts, treasury notes, euro commercial The weighted average interest rate on total debt after giv- paper and US commercial paper, and the portion of long- ing effect to hedging instruments (rate swaps and caps) term debt maturing in 2004. was 4.3% for the year ended December 31, 2003 (4.7% in 2002 and 5% in 2001). Total cash and cash equivalents amounted to €3 billion at year-end 2003, up from €1.3 billion at December 31, 2002. After giving effect to hedging instruments, at December This rise reflects increases in marketable securities from 31, 2003, 97% of Group debt was at fixed rates of interest €0.5 billion to €1.4 billion and cash on hand from €0.7 bil- and the rest at variable rates. A 1% rise in interest rates lion to €1.5 billion. The balance represents short-term would have a €6 million (1%) impact on net interest loans, which remained stable at €0.1 billion. expense in 2004.

In addition to the Group’s recourse to US commercial Net debt at December 31, 2003 after the effect of cross- paper, euro commercial paper, treasury notes and medi- currency swaps was 58% in EUR, 19% in USD and 19% in um-term notes, Compagnie de Saint-Gobain has access to GBP, with the remaining amount in other currencies. confirmed lines of credit (syndicated loans and bilateral lines) totaling €2.4 billion at December 31, 2003. None of At that date, including the impact of hedging, €563 mil- the lines were drawn down in 2003. lion of the Group’s net debt was due within one year, €3,545 million was due between one and five years, and A breakdown of long-and short-term debt is provided by €1,549 million was due beyond five years. type and maturity in Note 20 to the consolidated financial statements. Details of amounts, currencies, and early repay- Details concerning interest rates on the Group’s main bor- ment terms and conditions of the Group’s financing pro- rowings and hedging instruments (rate swaps and options) grams and confirmed credit lines are also discussed in this are provided in Note 21 to the consolidated financial state- Note. ments, as are details of the Group’s debt structure before and after using said hedging instruments, as well as the maturities of debt and cash and cash equivalents.

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Foreign currency risk Industrial and environmental risks The Group's policy on currency risk consists of hedging commercial transactions carried out by Group entities in currencies other than their functional currencies. Substantially all of the Group’s industrial and environmen- Compagnie de Saint-Gobain and its subsidiaries may use tal risks represent one type of risk, stemming from the stor- options and forward contracts to hedge exposure arising age of certain types of hazardous materials. from commercial transactions. Options are set up exclu- sively with Compagnie de Saint-Gobain, the parent com- Eight Group sites are classified as presenting “major tech- pany of the Group, which then takes a reverse position on nological risks”within the meaning of European and North the market. American regulations, and are therefore subject to specific legislation that is carefully monitored by the regulatory Most forward contracts are for periods of around three authorities. In 2003, seven Saint-Gobain sites were classed months. However, forward contracts taken out to hedge in the “Seveso” category in Europe: Conflans Saint- firm orders may have terms of up to two years. Honorine (Abrasives), Mers-les-bains (Containers) and Subsidiaries are authorized to enter into forward con- Bagneaux-sur-Loing (Flat Glass) in France, Neuburg tracts with their banks for periods of less than two years. (Containers) in Germany, Vamdrup (Insulation) in Denmark, Hyvinkää (Insulation) in Finland, and Azuqueca The majority of transactions are hedged, invoice by invoice de Henarès (Insulation) in Spain. or order by order, with Saint-Gobain Compensation, the entity set up to manage the Group’s currency risks. Saint- Three of these sites store substances which fall within the Gobain Compensation hedges these risks solely by means low threshold category defined in the Seveso directive and of forward purchases and sales of foreign currencies. This four fall within the high threshold category. The site at enables companies to hedge exposure arising from com- Vrena (Insulation) in Sweden is no longer classed in the mercial transactions as soon as the risk emerges. Saint- “Seveso” category as it was closed during 2003. Gobain Compensation reverses all its positions with Compagnie de Saint-Gobain and does not therefore have Of the sites that fall within the high threshold category, any open positions. two store phenol and formaldehyde, one stores liquid petroleum gas, and the fourth stores arsenic in the form of The exposure of other Group companies to currency risks is arsenious anhydride. hedged with Compagnie de Saint-Gobain as soon as the latter receives orders sent by the subsidiaries or by cash In accordance with the law of July 30, 2003 relating to the pools of the National Delegations. Exposure may also be prevention of technological and natural risks and the hedged with the banks of the subsidiaries concerned. Total remediation of contaminated areas, specific risk preven- unhedged transactions for these companies amounted to tion and safety measures have been put in place at each of €24 million at December 31, 2003. If the euro dropped by 1 these sites, with added emphasis on the high-threshold cent against the Group’s trading currencies, the impact Seveso classed plants. would be less than €1 million, which is not material at the level of the consolidated financial statements Once the plants identify the risk of accidents and the potential impact on the environment, they take preventive Equity risk measures relating to the design and construction of stor- age facilities, as well as conditions of use and mainte- The Group is not exposed to equity risk as it always favors nance. Crisis plans have been set up or are being finalized. money-market funds and/or bonds when purchasing A full evaluation of safe storage and risk prevention meth- mutual funds or equivalents, and is therefore not exposed ods carried out in 2003 showed that procedures were to any equity risk on its short-term investments. being consistently implemented at each of these units.

The Group previously held a portfolio of shares in listed With the exception of the site at Bagneaux-sur-Loing – a companies. All of these shares have been sold, apart from joint venture covered by a separate policy – liability with 5.3 million Vivendi Universal shares. These shares are car- respect to personal injury or property damage relating to ried in the balance sheet at their historical cost of €13.88 the operation of these plants is covered by the Group’s per share, representing a total of €74 million. third-party liability insurance program.

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In the event of an industrial accident, compensation pay- ed to a total of €1.4 million (versus €4 million at end-2002). ments to victims would be managed jointly by the compa- ny, the broker and the insurer. Further details of these claims are provided in Note 31 to the consolidated financial statements. A site based at Lake Charles in the United States falls under both the Risk Management Program Rule and the In the United States, the total number of new asbestos- Emergency Planning and Community Right to Know Act, as related claims filed – principally against CertainTeed – has it uses vinyl chloride. increased significantly since 2001. The multiplication of class actions has driven an increase in the number of new The Group’s other major industrial facilities are subject to claims, which amounted to 62,000 in 2003, 67,000 in a permits regime and are thus regularly monitored by local 2002 and 60,000 in 2001. Almost all of the claims against regulatory authorities. CertainTeed are settled out of court. Some 54,000 such settlements were entered into in 2003 (versus 44,000 in 2002), leaving some 108,000 claims outstanding at Legal risks December 31, 2003, compared with 107,000 a year earlier.

The Group is not subject to any specific regulations which The average individual cost of settlement based on all could have an impact on its situation, although compa- claims settled rose from US$1,955 in 2002 to around nies running industrial sites are generally required to US$2,100 in 2003. However, in view of the significant comply with specific national legislation and regulations increase in the number of new claims filed over the last that vary from country to country. In the case of France, for two years, the overall cost for the Group has risen consid- example, Group sites are subject to laws and regulations erably. Given all of these developments and taking into on regulated facilities (installations classées). The Group account insurance coverage available, the Group recorded has no significant technical or commercial dependence a €100 million charge in 2003, as in 2002. At December 31, on any other companies, is not subject to particular confi- 2003 the Group’s total cover for asbestos-related claims dentiality restrictions, and has the assets it requires to run against CertainTeed in the United States amounted to its operations. €341 million, comprised of insurance coverage available at that date and the provision referred to above (2002: €426 Compagnie de Saint-Gobain is assessed for income tax on million). its consolidated fiscal income as provided for under article 209 quinquies of the French Tax Code (CGI) as well as the Further details on asbestos-related claims in the United integrated tax (Intégration Fiscale) system as provided for States are provided in Note 31 to the consolidated financial under article 223 A et seq. of the CGI. The Group has statements. applied to the tax authorities to renew the tax consolida- tion agreement for the fiscal years 2004 to2006. To the best of the Company's knowledge, no other litiga- tion or arbitration is pending or in progress that is likely to The legal risk to which the Group is most exposed is have a material impact on the financial position, assets asbestos-related litigation, both in France and – above all and liabilities or results of Compagnie de Saint-Gobain or – in the United States. the Saint-Gobain Group.

In France, at December 31, 2003, 461 lawsuits based on Insurance – coverage of potential "inexcusable fault" ("faute inexcusable") had been filed for risks asbestos-related occupational diseases against Everite and Saint-Gobain PAM, which in the past had carried out In order to protect its assets and revenue streams, the fiber-cement operations. At the end of 2003, 164 of these Group relies on a policy of accident prevention and insur- 461 lawsuits had been completed both in relation to lia- ance coverage. This policy is embedded within a Group bility and quantum. In addition, 71 suits based on inexcus- doctrine, which takes into account current conditions in able fault had been filed against nine other French com- the insurance market. Insurance coverage is coordinated panies in the Group, in particular involving circumstances and monitored centrally by the Risks and Insurance where equipment containing asbestos had been used to Department, which lays out the Group doctrine. This doc- protect against heat from furnaces. At December 31, 2003 trine defines the applicable criteria for the coverage of compensation due from the first two companies amount- substantial risks such as property damage and business

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2003 Management report

interruption, as well as third-party liability insurance to When defining its policy towards insurance coverage, the protect against claims involving the Group’s operations or Risk and Insurance Department relies on the conclusions products. For other types of cover, such as automobile drawn in the annual audits carried out by the insurance insurance, the Risks and Insurance Department advises companies. These audits give a clear picture of the risks individual operating units on policy contents and choice of each principal subsidiary is exposed to in the event of an broker, as well as which market to consult. For these recur- accident – particularly fire damage – and detail the finan- ring risks, a procedure has been set up to monitor claims cial implications that would arise in a worst-case scenario. management and thus implement the appropriate pre- This risk evaluation exercise extends to assessing the ventive actions. impact an earthquake in California would have on Saint Gobain’s operating units in the region, enabling specific As many of the policies in force in 2003 span a number of coverage to be arranged for this risk, which is generally years, there has been no significant change in the Group’s excluded from insurance policies. overall coverage compared to 2002. • Third-party liability insurance: Newly acquired companies are integrated within the Two programs provide coverage for third-party personal existing insurance programs as quickly as possible to injury and property damage claims. The first covers all allow the Group to keep a tight rein on guarantees and subsidiaries, except for those located in the geographic optimize insurance costs. area covered by the General Delegation to the United States and Canada. In order to satisfy local regulatory • Property damage and business interruption: requirements, a policy is taken out in each country in The Group is covered for non-excluded property damage which the Group has a significant presence. Local policies and related business interruption arising from accidental are complemented by central policies issued in Paris damage to insured assets. This coverage is provided by a which can kick in when the local policy proves inadequate. number of regional programs, which meet the policy cri- teria laid down by the Risks and Insurance Department: Altogether, the contracted lines of coverage correspond to –policies should be all risks (subject to named exclusions) a limit deemed sufficient for the Group’s activity. Any –coverage ceilings should be based on worst-case scenarios exclusions carried by the program are consistent with cur- – deductibles should be proportional to the size of the site rent market practice, such as potentially carcinogenic sub- concerned and cannot be considered as self-insurance. stances and gradual pollution.

These policy criteria take into account current insurance The second program covers subsidiaries located in the offerings, which exclude certain risks such as computer geographic area covered by the General Delegation to the viruses and their impact on operations and set ceilings on United States and Canada. This program is structured dif- coverage for natural disasters such as floods or storms. In ferently to deal with the specific nature of third-party lia- extreme scenarios, such events could have a substantial bility coverage in the United States. The program is divid- non-insured financial impact, both in terms of recon- ed into several lines of coverage so that it can be placed on struction costs and losses linked to production stoppages. insurance markets in both London and Bermuda. The cov- erage provided is deemed adequate for the Group’s United A captive insurance company registered in Vermont in the States operations. The exclusions are in line with current United States was set up on January 1, 2003 to cover dam- market practice in America and concern matters such as age to property belonging to Saint Gobain’s United States contractual liability and third-party consequential loss. and Canadian subsidiaries. This has enabled the Group to reduce the impact of rising premiums while at the same As in 2002, personal injury arising from exposure to time maintaining deductibles at an acceptable level. asbestos was excluded from coverage provided under both programs in 2003. Settlements on such claims paid With the same aim in mind, the Group set up another out in the United States in 2003 related to policies taken captive insurance company in Ireland on January 1, 2004 out a number of years ago. to cover damage to property owned by subsidiaries out- side the United States and Canada. Awareness of the risk of third-party liability claims is heightened for the operating units and they have incen- Both of these insurance companies are wholly owned by tives to maintain tight control over the related costs as Saint-Gobain. they have to bear the cost of deductibles under the insur-

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ance programs. These deductibles do not however consti- Group’s activities in India and Brazil. Insurance coverage tute self-insurance. Saint-Gobain also runs a risk preven- is instead purchased locally under the supervision of the tion program at its operating units with the support of Risk and Insurance Department. the Environment, Health and Safety Department. Joint ventures and companies not controlled by the • Exceptions: Group are also not included in these programs. Again, Since local legislation prevents their inclusion, the pro- separate insurance coverage is purchased based on the grams discussed above do not handle risks specific to the advice of the Risk and Insurance Department.

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2003 Management report

Outlook for 2004

Management forecasts for 2004 are based on a moderate growth. Meanwhile, the outlook is more mixed for the economic recovery. This factors in an upturn in capital Group’s historic businesses: the Containers division is spending by companies in the United States, sustained expected to continue on its growth trajectory and the high levels of consumer spending and a persistently buoy- Insulation and Building Materials divisions should do well ant growth trend in emerging countries. At the same in the first half of the year, although there is a risk of a time, new construction starts are expected to slow in slow down in the United States in the second half. For the North America in the second half of the year. Flat Glass division, although the outlook remains encour- aging in emerging countries, things look less certain in The European outlook is similar to 2003, with the con- Europe in both the construction and automotive indus- struction industry expected to flag in Spain and the tries. Finally, the Pipe division will probably report a weak- United Kingdom, positive trends being maintained in er performance in 2004 as deliveries on the Abu Dhabi France and early signs of recovery still to be confirmed in contract were completed in the first quarter of the year. Germany. The renovation market is expected to continue to grow right across Europe, but the automotive industry In 2004, Saint-Gobain intends to continue focusing strategi- is likely to remain stable at best in comparison to 2002. cally on its business model,stepping up external growth and increasing capital spending in emerging markets. It will also On the basis of this scenario, the Group’s new businesses pursue the restructuring operations necessary for it to offer good potential for growth and increased profitability retain its competitive edge. Taking into account the risks in 2004. High-Performance Materials and Reinforcements related to the strong euro and the increase in commodities look set to enjoy a recovery in sales, and the Building and energy prices, in 2004 the Group will aim to outperform Materials Distribution division is expected to gather 2003 growth in operating income at constant exchange momentum in terms of both organic and external rates, and to maintain strong free cash flow levels.

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Financial statements

III•Consolidated Financial Statements IV• Financial Statements of Compagnie de Saint-Gobain (Parent Company)

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III•Consolidated financial statements

Consolidated balance sheets at December 31

ASSETSIF Notes 2003 2002 2001 (in € millions) Goodwill (3) 4,902 5,521 6,065 Other intangible assets, net (4) 1,836 1,914 1,805 6,738 7,435 7,870 Property, plant and equipment (5) 21,199 22,069 23,258 Less accumulated depreciation (5) (12,513) (12,687) (12,909) 8,686 9,382 10,349 Investments in equity investees (6) 75 114 169 Investments, at cost (7) 139 144 171 Non-current marketable securities (8) 78 175 176 Other non-current assets (9) 1,521 1,590 943 1,813 2,023 1,459 NON-CURRENT ASSETS 17,237 18,840 19,678 Inventories (10) 4,509 4,664 5,075 Trade accounts receivable, net (11) 4,240 4,264 4,552 Other accounts receivable (12) 1,035 1,010 1,228 Short-term loans (20) 160 162 245 Marketable securities (8) 1,387 469 406 Cash and cash equivalents (20) 1,527 739 958 CURRENT ASSETS 12,858 11,308 12,464

TOTAL ASSETS 30,095 30,148 32,142

The accompanying notes are an integral part of the consolidated financial statements.

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LIABILITIES AND SHAREHOLDERS’ EQUITY Notes 2003 2002 2001 (in € millions) Capital stock (at Dec. 31, 2003: made up of 347,824,967 €4 par value shares; at Dec. 31, 2002: 341,010,680 €4 par value shares; at Dec. 31, 2001: 85,258,628 €16 par value shares) 1,391 1,364 1,364 Additional paid-in capital and legal reserve 2,381 2,264 2,249 Retained earnings and net income for the year 9,869 9,204 8,540 Cumulative translation adjustments (2,241) (1,438) (161) Treasury stock (13) (313) (79) (67) SHAREHOLDERS’ EQUITY 11,087 11,315 11,925 Minority interests (14) 223 227 423 NET EQUITY OF CONSOLIDATED ENTITIES 11,310 11,542 12,348 Non-voting participating securities (15) 170 391 391 Pensions and other post-retirement benefits (16) 2,305 2,353 1,836 Deferred tax liability (17) 599 696 685 Other liabilities (18) 1,032 1,084 1,255 Long-term debt (20) 6,518 6,238 5,247 SHAREHOLDERS’ EQUITY AND NON-CURRENT LIABILITIES 21,934 22,304 21,762 Trade accounts payable 3,592 3,352 3,425 Other payables and accrued expenses (19) 2,356 2,348 2,801 Current portion of long-term debt (20) 550 487 991 Short-term debt and bank overdrafts (20) 1,663 1,657 3,163 CURRENT LIABILITIES 8,161 7,844 10,380 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 30,095 30,148 32,142

The accompanying notes are an integral part of the consolidated financial statements.

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Consolidated statements of income

TIF Notes 2003 2002 2001 (in € millions) Net sales 29,590 30,274 30,390 Cost of sales (22,263) (22,670) (22,692) Gross margin 7,327 7,604 7,698 Selling, general and administrative expenses including research (22) (4,626) (4,712) (4,774) Other operating costs (23) (259) (310) (243) Operating income 2,442 2,582 2,681 Dividend income 12 22 32 Interest and other financial charges, net (24) (457) (504) (603) Non-operating costs (25) (275) (252) (122) Income before profit on sales of non-current assets and taxes 1,722 1,848 1,988 Profit on sales of non-current assets, net (26) 86 3 84 Provision for income taxes (17) (595) (612) (721) Net operating income from consolidated companies before amortization of goodwill 1,213 1,239 1,351 Amortization of goodwill (154) (169) (184) Net operating income from consolidated companies 1,059 1,070 1,167 Share in net results of equity investees (6) 6 4 7 Net income before minority interests 1,065 1,074 1,174 Minority interests in consolidated companies (14) (26) (34) (40) NET INCOME 1,039 1,040 1,134 Earnings per share (in €) Weighted average number of shares in issue 337,226,640 336,727,133 334,139,384 Income before tax and minority interests per share 4.92 5.01 5.67 Basic earnings per share 3.08 3.09 3.39 Weighted average number of shares assuming full dilution 356,055,169 354,006,928 335,593,088 Income before tax and minority interests per share (diluted) 4.73 4.82 5.65 Diluted earnings per share 2.96 2.98 3.38 Number of shares in issue at December 31 347,824,967 341,010,680 341,034,512 Income before tax and minority interests per share 4.77 4.94 5.56 Earnings per share 2.99 3.05 3.33 The number of shares at December 31, 2001 has been multiplied by four to reflect the four-for-one stock split of June 27, 2002 in order to facilitate comparisons with the figures at December 31, 2002 and December 31, 2003. The accompanying notes are an integral part of the consolidated financial statements.

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Consolidated statements of cash flows

2003 2003 2002 2001 (in € millions) Net income 1,039 1,040 1,134 Minority interests 26 34 40 Excess of income of equity investees over dividends 1 (1) 7 Depreciation and amortization 1,491 1,603 1,636 Profit on sales of non-current assets (86) (3) (84) Cash flows from operations 2,471 2,673 2,733 (Increase) decrease in inventories (4) 97 (167) (Increase) decrease in trade accounts and other accounts receivable (24) 329 219 Increase (decrease) in trade accounts payable, other payables and accrued expenses 292 (63) (92) Changes in income taxes payable and deferred taxes 47 (120) 8 Other (80) (50) (159) Net change in working capital 231 193 (191) CASH FLOWS FROM OPERATING ACTIVITIES 2,702 2,866 2,542 Purchases of property, plant and equipment (1,351) (1,431) (1,430) Acquisitions of businesses [in 2003: (528), in 2002: (599), in 201: (764)], net of cash acquired (461) (575) (717) Disposals of consolidated investments, net of cash 523 104 140 Disposals of investments at cost 125 19 379 Acquisitions of investments at cost (32) (31) (52) Disposals of property, plant and equipment, and intangible assets 162 201 141 (Increase) decrease in marketable securities (1,156) (100) 115 Other 16 (236) (68) CASH FLOWS FROM INVESTING ACTIVITIES/DIVESTMENTS (2,174) (2,049) (1,492) Issues of capital stock 144 164 129 Minority interests’ share in capital stock increases of subsidiaries 5 15 13 Increases in treasury stock (229) (159) (31) Dividends paid (379) (378) (357) Dividends paid to minority shareholders of consolidated subsidiaries (24) (19) (30) (Increase) decrease in short-term loans 71 222 (16) Increase (decrease) in long-term debt 648 777 (805) Increase (decrease) in bank overdrafts and other short-term debt 57 (1,597) 335 CASH FLOWS FROM FINANCING ACTIVITIES 293 (975) (762) Net effect of exchange rate changes on cash and cash equivalents (33) (61) 4 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 788 (219) 292 Cash and cash equivalents at beginning of year 739 958 666 Cash and cash equivalents at end of year 1,527 739 958 The accompanying notes are an integral part of the consolidated financial statements.

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Statements of changes in consolidated shareholders’ equity

(Number of shares) (in € millions) Shareholders’ Additional Retained Cumulative equity Issued Excluding Capital paid-in earnings translation Treasury treasury stock stock capital and and net adjustments stock legal reserve income for the year Balance at December 31, 2000 85,213,263 83,216,292 1,363 2,270 7,760 (310) (182) 10,901 Issues of capital stock •Group savings plan 903,150 903,150 14 106 120 •Stock option plans 121,778 121,778 2 7 9 Net income for 2001 1,134 1,134 Dividends paid (per share: €1.075)* (357) (357) Translation adjustments 149 149 Treasury stock purchased (242,048) (37) (37) Treasury stock canceled (979,563) (15) (134) 149 0 Treasury stock sold 54,868 3 3 6 At December 31, 2001 85,258,628 84,054,040 1,364 2,249 8,540 (161) (67) 11,925 Stock-split 255,775,884 252,162,120 Issues of capital stock •Group savings plan 4,703,396 4,703,396 19 140 159 •Stock option plans 226,480 226,480 1 4 5 Net income for 2002 1,040 1,040 Dividends paid (per share: €1.125) (378) (378) Translation adjustments (1,277) (1,277) Treasury stock purchased (5,403,148) (162) (162) Treasury stock canceled (4,953,708) (20) (129) 149 0 Treasury stock sold 107,976 2 1 3 At December 31, 2002 341,010,680 335,850,864 1,364 2,264 9,204 (1,438) (79) 11,315 Issues of capital stock •Group savings plan 6,499,407 6,499,407 26 112 138 •Stock option plans 314,880 314,880 1 5 6 Net income for 2003 1,039 1,039 Dividends paid (per share: €1.130) (379) (379) Translation adjustments (803) (803) Treasury stock purchased (6,784,000) (238) (238) Treasury stock canceled 0 Treasury stock sold 304,430 5 4 9 AT DECEMBER 31, 2003 347,824,967 336,185,581 1,391 2,381 9,869 (2,241) (313) 11,087

* The dividend paid per share for 2001 has been divided by four to reflect the four-for-one stock split of June 27, 2002, in order to facilitate comparisons with the figures for 2002 and 2003. At December 31, 2003 the number of shares making up Compagnie de Saint-Gobain’s capital stock totaled 347,824,967. Under the stock option plan set up by the Board of Directors on November 21, 1996, 355,700 options are outstanding and exercisable before November 20, 2004 for the same number of shares with a par value of €4 each. In accordance with the authorizations to increase capital stock granted by the Ordinary and Extraordinary Shareholders’ Meeting of June 5, 2003, the Board of Directors may issue, in one or several stages, up to 190 million new shares with or without preemptive or priority subscription rights for Compagnie de Saint-Gobain shareholders (eleventh and twelfth resolutions), 16 million new shares offered for subscription by members of the Group Savings Plan (thirteenth resolution), and 10,230,320 stock options corresponding to 3% of the total shares making up the Company’s share capital at the date of the authorization, exercisable for the same number of shares (fourteenth resolution). As the Board of Directors used these authorizations to grant 3,717,700 stock options on November 20, 2003, if these options were exercised and the Board of Directors issued all of the remaining stock options available for grant under the authorization, the number of shares making up the Company’s capital stock would be increased to 564,410,987. The Board of Directors also used the authorization granted in the fifteenth resolution of the same meeting to cancel 6,799,832 shares on January 29, 2004, thus reducing the potential number of shares making up the Company’s capital stock to 557,611,155. If all of the Océane bonds in issue were converted or exchanged for shares, the total number of shares making up the Company’s capital stock would be increased to 575,134,967. Translation adjustments at December 31, 2003 include a net amount of €60 million (€61 million at December 31, 2002 and €62 million at December 31, 2001) in adjustments arising from the translation of the balance sheets of companies outside the euro zone. These adjustments will be taken to the statement of income in the event that the companies are sold. The accompanying notes are an integral part of the consolidated financial statements. 110 SAINT-GOBAIN • 2003 CONSOLIDATED FINANCIAL STATEMENTS SAINT-GOBAIN RA 2003 Conso GB 19/05/04 7:41 Page 111

Notes to the consolidated Translation of the financial statements financial statements of foreign companies Balance sheet items are translated using year-end exchange i rates. Note 1 - Accounting principles and policies Income and expenditure items are translated using the average exchange rate for the year. Basis of presentation The Group’s share of any translation gains and losses less any related tax effect, is included in shareholders’ equity under the The consolidated financial statements of Compagnie de Saint- caption “Cumulative translation adjustments” until such time Gobain and its subsidiaries (together “the Group”) have been as the foreign investments to which they relate are sold or prepared in accordance with French generally accepted liquidated. accounting principles. The preparation of financial statements in conformity with French generally accepted accounting principles requires Goodwill management to make estimates and assumptions that affect Goodwill represents the excess of the purchase price over the the reported amounts of assets and liabilities and the disclo- fair value of net assets acquired. Goodwill is amortized on a sure of contingent assets and liabilities at the date of the finan- straight-line basis over its expected useful life for a period not cial statements, as well as the reported amounts of expense or exceeding 40 years. income during the year. Actual results may differ from those estimates. Other intangible assets Principles of consolidation Other intangible assets include purchased goodwill, patents, trademarks, computer software, and debt issuance costs. The consolidated financial statements include the financial Trademarks, other than retail brands, are amortized on a statements of Compagnie de Saint-Gobain and all significant straight-line basis over a period not exceeding 40 years. Retail majority-owned subsidiaries, as well as subsidiaries in which brands are not amortized. the Group holds a controlling interest, either directly or indi- Patents and purchased computer software are amortized over rectly. Non-consolidated companies represent less than 0.3% of their estimated useful lives. Patents are amortized over a period consolidated net sales. not exceeding 20 years. Purchased software is amortized over a Companies that are jointly owned are proportionately consoli- period of 3 to 5 years. dated. Debt issuance costs relating to bonds or other long-term Companies in which the Group exercises directly or indirectly a borrowings are capitalized and amortized over the term of the significant influence are consolidated by the equity method. debt. Companies which are not material for the Group (external sales under €5 million) are accounted for by the equity method. The same applies to companies which are practically difficult to Property, plant and equipment fully consolidate for reasons such as geographical distance or Property, plant and equipment are stated at cost except for the recent acquisition. fixed assets of subsidiaries operating in formerly highly infla- Investments in other companies, in which the Group does not tionary countries which have been revalued in accordance with exercise significant influence, are stated at cost. A provision is the provisions of local laws. made where necessary to write down the cost to estimated net Property, plant and equipment is depreciated on a straight-line realizable value. basis over the following estimated useful lives: The results of companies acquired or disposed of during the Major factories and offices 40 years year are included in the consolidated statement of income for Other buildings 15 - 25 years the period after the date of acquisition or before the date of Production machinery and equipment 5 - 16 years disposal, respectively. Vehicles 4 years Significant changes in the Group’s structure for the year ended Furniture, fixtures, office December 31, 2003 are shown in note 2. A summary list of and computer equipment 4 - 16 years significant consolidated companies as of December 31, 2003 is Investment grants relating to acquisitions of non-current shown in note 34. assets are deferred, recorded under “Other payables and All significant intercompany accounts and transactions are accrued expenses” and credited to income over the estimated eliminated in consolidation. useful lives of the relevant assets. Upon retirement or sale, the cost of the assets disposed of and Foreign currency transactions the related accumulated depreciation are written off from the balance sheet and any resulting gains or losses are recognized Transactions in foreign currencies are recorded at the exchange in the income statement. rate prevailing on the transaction date. Receivables, payables and bank balances in foreign currencies are generally trans- lated at the year-end rate and the related exchange differences are recorded in the income statement.

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Valuation of non-current assets Inventories The Group carries out impairment tests on a regular basis for Inventories are valued at the lower of cost and market. Cost is non-current assets, including goodwill, other intangible assets, generally determined using the weighted-average cost and property, plant and equipment. method, and in some cases, the First-In-First-Out method. These tests consist of comparing the assets’carrying value with their fair value or value in use, determined based on the esti- mated discounted future net cash flows generated by their Financial instruments use. The Group uses derivative financial instruments for the For property, plant and equipment, impairment tests are purpose of hedging currency and interest rate exposures that carried out when they generate operating losses and where no exist as part of ongoing business operations. significant recovery is expected based on annual budget The main financial instruments used to hedge foreign figures or the business plans concerning those assets. exchange risks are forward purchase and sale contracts and For intangible assets and goodwill, impairment tests are options. Hedged receivables and payables are recorded in the carried out annually based on a five-year business plan. Using balance sheet at the hedging rate.The portion representing the this plan, goodwill is reviewed exhaustively at the level of each extrinsic (time) value of unrealized gains or losses on currency business and where necessary more detailed tests are carried options used to hedge the above positions is taken to income, out. and the portion representing intrinsic value is recorded in the The method used for these impairment test is consistent with balance sheet. Unrealized losses on options which are not clas- that used by the Group for valuing companies when the Group sified as hedges are recognized in the income statement, acquires all or part of their capital. The carrying value of non- whereas unrealized gains are not taken into account. current assets is compared with the estimated discounted The Group uses interest-rate swaps and swaptions (caps and future net cash flows generated by the assets concerned, after floors) as well as forward rate agreements to hedge its expo- tax and excluding interest costs. Cash flows for the fifth year of sure to increases in interest rates. Gains and losses related to the business plan are rolled forward over the following two interest-rate swaps are recognized on a symmetrical basis with years and then projected to perpetuity using a low growth rate. the losses and gains on the hedged items. The discount rate used for future cash flows corresponds to the The portion representing the extrinsic (time) value of unreal- Group’s cost of capital. ized gains or losses on interest rate options used to hedge the An impairment loss is recognized if the annual impairment above positions is taken to income and the portion repre- tests show that the fair value of an asset is lower than its senting intrinsic value is recorded in the balance sheet. Interest- carrying value. rate options which are not classified as hedges are recognized in the income statement at market value. Asset financing The Group’s assets are generally financed through debt. Marketable securities However, certain non-current assets are acquired through Marketable securities consist of shares in subsidiaries and affil- finance leases which are recognized as capital leases. The iates, units in mutual funds and short-term investments. They accounting treatment of these leases is described below. are recorded at the lower of cost and market. The Group has also set up a receivables securitization program in the United States (see note 21). Finally, Group companies also use available receivables management facilities in accordance Cash and cash equivalents with local practices such as factoring, discounting and transfers This item consists of cash on hand and balances with banks. in accordance with the Dailly Act in France.

Leases Pensions and other post-retirement benefits After retirement the Group’s former employees receive Assets held under leases which transfer to the Group substan- pensions in accordance with applicable laws and practices in tially all of the risks and rewards of ownership are capitalized as the respective countries in which the Group operates.There are property, plant and equipment. The capitalized values of the additional pension obligations in certain Group companies, in assets are depreciated on a straight-line basis over the useful France and other countries. life of the assets. The corresponding liability is shown net of In France, employees receive indemnities on retirement based related interest in the balance sheet. on past service and other terms in accordance with the respec- Operating lease rental payments are expensed in the year in tive collective bargaining agreements. which they are incurred.

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The Group’s obligations in respect of pensions and retirement Income taxes indemnities are determined using an actuarial method based Under an agreement with the French tax authorities, on projected end-of-career salaries (the projected unit credit Compagnie de Saint-Gobain is assessed for income tax method) taking into account the specific economic conditions purposes on its consolidated fiscal income. The amounts applicable in each country. These obligations are covered by payable or receivable by Compagnie de Saint-Gobain resulting retirement funds and provisions recorded in the balance sheet. from the application of the agreement are included in other The method adopted complies with both French generally accounts receivable and other payables. accepted accounting principles and U.S. GAAP. Deferred tax assets and liabilities are calculated using the In the United States, Spain and Germany, retired employees liability method, based on temporary differences between the receive benefits other than pensions, mainly concerning values of assets and liabilities recorded in the financial state- healthcare. The Group’s obligations in this respect are deter- ments and those used for tax purposes. Tax rates applicable to mined using an actuarial method and are covered by a provi- future periods are used to calculate year-end deferred income sion recorded in the balance sheet. tax amounts. In addition, in the United States, certain benefits such as A provision is recorded against deferred tax assets correspon- income support and healthcare may be granted to former ding to tax loss carryforwards and deductible temporary differ- employees before their retirement. The present value of these ences when it is more likely than not that the asset will not be obligations is determined using rates applied for pensions and realized. Under the worldwide tax regime, this valuation is covered by a provision recorded in the balance sheet. allowance is assessed at the tax group level for companies included in the tax consolidation and at the individual tax Negative shareholders’ equity entity level for companies not included in the tax consolidation. No provision is made in respect of earnings of subsidiaries that When shareholders’equity of a consolidated subsidiary is nega- are not intended to be distributed. tive at the end of the financial period, the minorities’ share of Deferred taxes have not been discounted as the Group is not in shareholders’ equity is expensed by the Group unless the third a position to reliably measure when they will be reversed, parties have a specific obligation to contribute their share of particularly due to the number of subsidiaries concerned and losses. If these companies return to profit, the Group’s equity in the nature of the tax regime applicable to the consolidated tax their earnings is recorded by the majority shareholder up to the group. amount required to cover losses recorded in prior years. A deferred tax liability is recorded on retail brands valued in the consolidated financial statements, even when they cannot be Revenue recognition sold separately from the company being acquired. In view of the Group’s expectations with regard to future developments, Revenue from sales of products or services is recognized when it has decided to maintain the method used prior to the adop- the risks and rewards of ownership are transferred to the tion of CRC regulation 99-02.The amount of deferred tax assets customer or following delivery of the service, net of sales taxes recorded for retail brands appears in note 17. and discounts. The liability for incurred warranty claims is accrued when it is determined that a liability exists and that payment is probable. Advertising costs Advertising costs are expensed as incurred. Research and development costs Research and development costs are expensed as incurred and Earnings per share recorded in selling, general and administrative expenses. The Group discloses earnings per share, based on net income and based on income before tax and minority interests. Interest charges Earnings per share are calculated by dividing earnings by the average number of shares in issue during the period, after All interest charges are expensed as incurred except for charges deduction of treasury stock. incurred during the construction of significant non-current Diluted earnings per share are calculated by including in the assets, which are capitalized and included in the construction average number of shares the conversion of all dilutive share cost of the related non-current assets. equivalents in issue (stock options and convertible bonds). The Group also discloses earnings per share calculated by dividing earnings by the number of shares in issue at the end Non-operating income and expense of the fiscal year. Non-operating expenses and income include additions to and reversals from provisions for claims and litigation and environ- mental provisions, as well as reorganization costs arising on the disposal of activities and measures in favor of employees affected by downsizing plans.

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iNote 2 - Changes in group structure In 2003, the main changes in Group structure represented the sale of the Terreal Group and the acquisition of several compa- Changes in Group structure were as follows in 2003: nies in the Building Materials Distribution Division, in France (including the Dubois Matériaux, Pum Plastiques and Sem Angles groups) and in the United Kingdom. 2003 France Outside Total In 2002 no material companies were fully consolidated for the France first time. However, the Group purchased all outstanding Fully consolidated companies minority interests in the Lapeyre Group thus raising its stake At January 1 213 787 1,000 from 74.68% to 100%. Newly consolidated companies 26 50 76 In 2001 the Group issued public tender offers for the minority € (45) (24) (69) interests in Saint-Gobain Cristalería for 231 million, in Saint- Merged companies € (2) (19) (21) Gobain Vidros for 79 million, in Saint-Gobain Canalizaçao for Deconsolidated companies €17 million, and in Brasilit for €18 million. Changes in consolidation method 7 7 At December 31 192 801 993 Proportionally consolidated iNote 3 - Goodwill companies At January 1 2 16 18 2003 2002 2001 At December 31 2 16 18 (in € millions) Companies accounted Net book value at January 1 5,521 6,065 6,004 for by the equity method Acquisitions 301 178 164 At January 1 14 76 90 Translation adjustments Newly consolidated companies 3 3 and impact of disposals (715) (519) 106 Merged companies (5) (5) Amortization for the year (205) (203) (209) Deconsolidated companies (1) (10) (11) NET BOOK VALUE Changes in consolidation method (7) (7) AT DECEMBER 31 4,902 5,521 6,065 At December 31 13 57 70 € TOTAL AT DECEMBER 31, 2003 207 874 1,081 In 2003,“Acquisitions”included 144 million in goodwill recog- nized on the purchase of Saint-Gobain’s interest in Pum Plas- tiques, acquired for €181 million. Other items which had a At December 31, 2003 the effect on balance sheet captions of material impact on goodwill included the sale of the Terreal changes in Group structure and in consolidation methods is as Group (€152 reduction in goodwill, net of amortization) and the follows: stronger euro which led to negative translation adjustments of €421 million for the year. In 2002, “Acquisitions”included €58 million in goodwill recog- € (in millions) Increase Decrease Total nized on the purchase of minority interests in the Lapeyre Impact on assets Group, which was acquired for €350 million. Movements in Non-current assets 436 (532) (96) “Translation adjustments and impact of disposals” primarily Inventories, trade and other reflected changes in the US dollar exchange rate over the year. accounts receivable 423 (205) 218 In 2001, changes in goodwill mainly related to the first-time 859 (737) 122 consolidation of several medium-sized companies. Impact on liabilities 4 2 6 Minority interests i Long-term liabilities 26 (26) 0 Note 4 - Other intangible assets, net Payables 269 (98) 171 Changes in other intangible assets are summarized below: Debt and overdrafts* 32 (83) (51) 331 (205) 126 2003 2002 2001 Impact of acquisitions, (in € millions) disposals and changes Net book value at January 1 1,914 1,805 1,766 in consolidation methods 528 (532) (4) Additions and changes Cash and cash equivalents (67) 9 (58) in Group structure 85 290 113 (2) (4) (12) NET IMPACT ON CASH FLOWS 461 (523) (62) Disposals Translation adjustments (80) (94) 22 * Representing the net indebtedness of the Group. Amortization for the year (81) (83) (84) NET BOOK VALUE AT DECEMBER 31 1,836 1,914 1,805

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Intangible assets break down as follows: Because their fair value is at least equal to cost, retail brands do not require a provision for impairment in value. 2003 2002 2001 Changes in “Retail brands” in 2003 were exclusively due to (in € millions) translation adjustments. At cost In 2002, changes in “Retail brands” mainly concerned the addi- tion of the Lapeyre brand in an amount of €189 million, based Purchased goodwill 92 84 82 on the allocation of goodwill determined after the purchase of Patents 145 171 197 the minority interests in the group. Retail brands 1,469 1,516 1,376 Computer software 398 344 293 Other 285 327 369 TOTAL AT COST 2,389 2,442 2,317 Amortization and provisions for impairment in value Purchased goodwill (50) (43) (41) Patents (106) (124) (134) Computer software (247) (196) (166) Other (150) (165) (171) TOTAL AMORTIZATION AND PROVISIONS FOR IMPAIRMENT IN VALUE (553) (528) (512) OTHER INTANGIBLE ASSETS - NET 1,836 1,914 1,805

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iNote 5 - Property, plant and equipment

Immobilisation (in € millions) Changes At Dec. 31, in Group Acqui- Translation Depreciation At Dec. 31, 2002 structure sitions Disposals Transfers adjustments charge 2003 2003 At cost: Land 1,238 21 13 (22) 4 (59) – 1,195 Buildings 5,350 (9) 109 (101) 151 (266) – 5,234 Machinery and equipment 14,682 (239) 423 (607) 519 (867) – 13,911 Construction in progress 799 2 806 (11) (674) (63) – 859 TOTAL AT COST 22,069 (225) 1,351 (741) 0 (1,255) – 21,199 Depreciation: Land (91) (2) – 2 – 2 (10) (99) Buildings (2,546) 30 – 65 – 83 (228) (2,596) Machinery and equipment (10,045) 175 – 551 – 521 (1 018) (9,816) Construction in progress (5) 0 – 3 – 0 0 (2) TOTAL DEPRECIATION (12,687) 203 – 621 – 606 (1 256)(12,513) NET BOOK VALUE 9,382 (22) 1,351 (120) 0 (649) (1 256)8,686

Immobilisation (in € millions) Changes At Dec. 31, in Group Acqui- Translation Depreciation At Dec. 31, 2001 structure sitions Disposals Transfers adjustments charge 2002 2002 At cost: Land 1,290 25 26 (29) 7 (81) – 1,238 Buildings 5,567 43 156 (110) 106 (412) – 5,350 Machinery and equipment 15,539 (74) 509 (591) 623 (1,324) – 14,682 Construction in progress 862 44 740 (11) (736) (100) – 799 TOTAL AT COST 23,258 38 1,431 (741) 0 (1,917) – 22,069 Depreciation: Land (84) (5) – 2 – 5 (9) (91) Buildings (2,501) (23) – 79 – 140 (241) (2,546) Machinery and equipment (10,319) 75 – 521 – 779 (1,101) (10,045) Construction in progress (5) 0 – 0 – 0 0 (5) TOTAL DEPRECIATION (12,909) 47 – 602 0 924 (1,351)(12,687) NET BOOK VALUE 10,349 85 1,431 (139) 0 (993) (1,351) 9,382

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Immobilisation (in € millions) Changes At Dec. 31, in Group Acqui- Translation Depreciation At Dec. 31, 2000 structure sitions Disposals Transfers adjustments charge 2001 2001 At cost: Land 1,236 55 41 (50) – 8 – 1,290 Buildings 5,199 98 144 (87) 150 63 – 5,567 Machinery and equipment 14,671 154 569 (539) 484 200 – 15,539 Construction in progress 832 (4) 676 (27) (634) 19 – 862 TOTAL AT COST 21,938 303 1,430 (703) 0 290 – 23,258 Depreciation: Land (73) ––1 ––(12) (84) Buildings (2,279) (23) – 32 – (8) (223) (2,501) Machinery and equipment (9,454) (133) – 480 – (79) (1,133) (10,319) Construction in progress (19) ––13 – 1 – (5) TOTAL DEPRECIATION (11,825) (156) – 526 0 (86) (1,368) (12,909) NET BOOK VALUE 10,113 147 1,430 (177) 0 204 (1,368)10,349

The main reason for the reduction in “Property, plant and In 2003, the Group recorded a total charge of €121 million for equipment” in 2003 is the impact of exchange rate fluctua- the write-down of certain goodwill and assets to net realizable tions. value based on estimated future discounted cash flows, As an industrial group, Saint-Gobain does not have a significant compared with €46 million in 2002 and €105 million in 2001. non-operating property portfolio, except for its head office building. Property, plant, and equipment include the following acquired iNote 6 - Investments in equity investees under capital leases: The Group’s share in net income of equity investees can be 2003 2002 2001 analyzed as follows: € (in millions) 2003 2002 2001 At cost: (in € millions) Land and buildings 202 164 181 At January 1 114 169 393 Machinery and equipment 38 41 46 Changes in Group structure (35) (35) (216) Total assets under Dividends paid (7) (3) (14) capital leases – gross 240 205 227 Share in net income Depreciation (99) (88) (100) of equity investees 6 4 7 NET BOOK VALUE 141 117 127 Translation adjustments (3) (21) (1) 75 114 169 The depreciation and amortization charge is as follows: AT DECEMBER 31

2003 2002 2001 No material changes in investments in equity investees occurred in 2002 or 2003. (in € millions) The reduction in investments in equity investees in 2001 was Amortization of other primarily due to the proportional consolidation, effective from intangible assets (note 4) 81 83 84 January 1, 2001, of Hankuk Glass and its subsidiaries which were 154 169 184 Amortization of goodwill previously accounted for by the equity method. Depreciation of property, plant and equipment* 1,256 1,351 1,368 TOTAL DEPRECIATION AND AMORTIZATION 1,491 1,603 1,636 *Included in cost of sales 1,089 1,174 1,204

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iNote 7 - Investments at cost

2003 2002 2001 (in € millions) Gross Net Gross Net Gross Net book book book book book book value value value value value value At January 1 206 144 233 171 224 178 Acquisitions 32 32 31 31 52 52 Disposals (17) (10) (10) (7) (10) (7) Provisions for impairment in value for the year – (3) – (1) – (20) Changes in Group structure (27) (24) (44) (48) (33) (32) Translation adjustments (2) – (4) (2) –– AT DECEMBER 31 192 139 206 144 233 171

The fair value of these investments approximates their net book value.

iNote 8 - Current and non-current The decrease in non-current marketable securities in 2003 marketable securities primarily reflects the sale of 7,000,000 Vivendi Universal shares. Marketable securities include units in SICAV and other mutual The increase in total marketable securities in 2003 mainly funds as well as short-term investments recorded at the lower reflects cash and cash equivalents generated at the end of the of cost and market. These marketable securities are principally year, primarily due to the proceeds of the April 8, 2003 bond variable-income. Unrealized gains on marketable securities are issue and the disposal of both Vivendi Universal shares and the not considered as material in the consolidated financial state- Terreal Group. ments. Marketable securities which cannot be recognized as cash equivalents are considered by the Group as “available for sale”. iNote 9 - Other non-current assets The breakdown of these marketable securities is shown below: 2003 2002 2001 (in € millions) € (in millions) Gross Net Unrea- Estimated 340 517 441 book book lized market Capitalized loans and deposits value value gains value (1) Retirement benefits – At December 31, 2003: Additional minimum liability 1,067 946 130 Vivendi Universal 74 74 28 102 Prepaid pension costs 114 127 372 Other interests 745 9OTHER NON-CURRENT ASSETS 1,521 1 590 943 NON-CURRENT MARKETABLE SECURITIES 81 78 33 111 “Retirement benefits – Additional minimum liability” and “Pre-paid pension costs” are a result of the adoption of US TOTAL MARKETABLE generally accepted accounting principles relating to pensions 1,387 1,387 – 1,387 SECURITIES and other post-retirement benefits. At December 31, 2002: The accounting methods applicable to these two items are Vivendi Universal 171 171 19 190 described in note 16. Other interests 742 6The rise in “Retirement benefits – Additional minimum liability”at December 31, 2002 was mainly due to the decrease NON-CURRENT in the fair value of retirement funds, leading to an increase in MARKETABLE SECURITIES 178 175 21 196 the related provisions. TOTAL MARKETABLE In accordance with French generally accepted accounting prin- SECURITIES 469 469 – 469 ciples, the total additional minimum liability has been recorded At December 31, 2001: under “Other non-current assets”. Under US generally accepted 171 171 586 757 accounting principles, part of the commitment – in an amount Vivendi Universal € € € 752 7of 985 million ( 877 million in 2002 and 124 million in 2001) Other interests – would be recorded as a deduction from shareholders’ equity, NON-CURRENT net of tax. MARKETABLE SECURITIES 178 176 588 764 TOTAL MARKETABLE SECURITIES 406 406 – 406

(1) Based on stock market prices at December 31.

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iNote 10 - Inventories iNote 12 - Other accounts receivable At December 31, 2003, 2002 and 2001, raw materials, work in All amounts recorded under “Other accounts receivable” are progress and finished goods as well as provisions for impair- due within one year. ment in value of inventories can be analyzed as follows: 2003 2002 2001 2003 2002 2001 (in € millions) (in € millions) Advances to suppliers 90 53 88 At cost: Prepaid payroll taxes 22 18 26 Raw materials and supplies 1,088 1,184 1,376 Other prepaid and Work in progress 320 352 390 recoverable taxes 413 356 348 Finished goods 3,480 3,534 3,728 Accrued income 154 188 194 Gross inventories 4,888 5,070 5,494 Other receivables 361 401 578 Provisions for impairment Provisions for in value: impairment in value (5) (6) (6) Raw materials and supplies (92) (89) (93) OTHER ACCOUNTS RECEIVABLE 1,035 1,010 1,228 Work in progress (14) (16) (14) Finished goods (273) (301) (312) Provisions for impairment iNote 13 - Treasury stock in value (379) (406) (419) Further to the four-for-one stock split of June 27, 2002, the 4,509 4,664 5,075 NET INVENTORIES number of shares at December 31, 2001 has been multiplied by four in order to permit year-on-year comparisons. Compagnie de Saint-Gobain capital stock held by consolidated iNote 11 - Trade accounts receivable Group companies is shown as a separate deduction from shareholders’ equity under “Treasury stock”, at historical cost. Trade accounts receivable are short-term receivables. Total shares held in treasury stock were 11,639,386 at December 2003 2002 2001 31, 2003, 5,159,816 at December 31, 2002, and 4,818,352 at December 31, 2001 (in € millions) In 2003, the Group purchased 6,784,000 Compagnie de Saint- Trade accounts receivable 4,582 4,646 4,957 Gobain shares on the stock market (2002: 5,403,148 shares; Less provisions 2001: 968,192 shares) and re-sold 304,430 of them (2002: for doubtful accounts (342) (382) (405) 107,976; 2001: 219,472). NET TRADE ACCOUNTS No shares were canceled in 2003, compared with 4,953,708 RECEIVABLE 4,240 4,264 4,552 shares canceled in 2002 and 3,918,252 in 2001. On January 29, 2004 the Board of Directors canceled 6,799,832 shares, bringing the number of shares making up the Changes in provisions for doubtful accounts Company’s capital stock at that date to 341,025,135, practically unchanged compared with the 341,010,680 shares outstanding 2003 2002 2001 at December 31, 2002. (in € millions) Share buybacks in 2003, 2002 and 2001 were carried out for several different purposes, but specific numbers of shares were At January 1 (382) (405) (349) 30 4 (27) not assigned to each objective.Therefore, the shares concerned Movement for the year were recorded as treasury stock. Changes in Group structure (5) (1) (26) Translation adjustments 15 20 (3) AT DECEMBER 31 (342) (382) (405)

In 2003, the total charge related to unrecoverable receivables amounted to €73 million (2002: €93 million; 2001: €115 million). The Group has a securitization program in place in the United States, which is explained in note 21.

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iNote 14 - Minority interests voting participating securities indexed against Euribor (as a minimum) comprises a fixed interest element applicable to 2003 2002 2001 60% of the nominal value of the security and equal to 7.5% per (in € millions) annum, and a variable amount on the remaining 40% based on At January 1 227 423 823 the consolidated net income of the previous year, within the limits fixed in the prospectus. Net income for the year 26 34 40 As part of the Group’s interest cost management, in the past, Dividends paid (24) (19) (30) Spafi and Saint Gobain Nederland – two wholly owned by consolidated subsidiaries subsidiaries of Compagnie de Saint Gobain – purchased certain Minority interests’ of these NVPs. At December 31, 2003, Spafi held 681,416 TMO- share in capital stock indexed NVPs and Saint-Gobain Nederland held 117,117 Euribor- 5 15 13 increases of subsidiaries indexed NVPs. At that date, the book value of NVPs held by the Changes in Group Group amounted to €221 million. structure (note 2) 6 (142) (425) During that period, the Group felt that it would be possible to Translation adjustments (17) (84) 2 reclassify these securities and sell them as over-the-counter AT DECEMBER 31 223 227 423 instruments, particularly to institutional investors such as pension funds. Therefore, as the Group was entitled to sell the In 2003, there were no significant movements in minority inter- NVPs purchased by these two subsidiaries, they were originally ests. classified in the subsidiaries’ accounts and in the consolidated In 2002, the bulk of the decrease in this item reflected the financial statements as marketable securities. Based on recent purchase of the outstanding minority interests in the Lapeyre advice however, it is no longer in the Group’s best interests to Group during the first half of the year. sell these NVPs. It therefore decided to reclassify them by The decrease in this item in 2001 primarily reflected the deducting them from “Non-voting participating securities” in purchase of almost all of the minority interests in Saint-Gobain the consolidated financial statements at December 31, 2003. Cristalería, Saint-Gobain Vidros, Saint-Gobain Canalizaçao and Further to this reclassification non-voting participating securi- € Brasilit. ties in the consolidated balance sheet amounted to 170 million at December 31, 2003, compared with €391 million at December 31, 2002 and 2001. This item can be analyzed as iNote 15 - Non-voting follows: participating securities 2003 2002 2001 In the 1980s, Compagnie de Saint-Gobain issued 1,288,299 TMO- (in € millions) indexed non-voting participating securities (indexed against TMO-indexed securities average bond rates) and 194,633 Euribor-indexed non-voting (indexed against average participating securities. These securities are not redeemable bond rates) 92 196 196 and the interest paid on them is included in financial charges. Euribor-indexed securities 78 195 195 The interest paid on the 1,288,299 TMO-indexed non-voting TOTAL 170 391 391 participating securities, up to a limit equal to 125% of the average rate of interest on bonds, includes a fixed interest Net interest paid on non-voting participating securities element and a variable portion based on the consolidated net amounted to €10 million in 2003, compared with €11 million in income of the Group. The interest paid on the 194,633 non- 2002 and €12 million in 2001.

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iNote 16 - Pensions and other post-retirement benefits The following tables show commitments for pensions and other post-retirement benefits:

France Other European countries North America Rest of the world (in € millions)s Plans with Plans Plans with Plans assets in with assets in with Pensions excess accumulated excess accumulated Pensions and of benefits of benefits and retirement accumulated in excess accumulated in excess retirement Net indemnities benefits of plan assets benefits of plan assets indemnities total AT DECEMBER 31, 2003 Projected benefit obligation 453 277 2,830 11 1,489 51 5,111 Plan assets 102 320 1,548 12 1,149 36 3,167 Benefits in excess of (less than) plan assets 351 (43) 1,282 (1) 340 15 1,944 Deferred variances (93) (64) (737) (5) (423) 0 (1,322) Minimum additional liability (see note 9) 1,067 Accruals for related benefits 6 211 217 Prepaid pension cost (see note 9) 114 Contractual termination indemnities 74 Insurance funding 211 Total provisions for pensions and other post-retirement benefits 2,305

AT DECEMBER 31, 2002 Projected benefit obligation 420 261 2,766 12 1,498 32 4,989 Plan assets 98 323 1,514 12 1,087 27 3,061 Benefits in excess of (less than) plan assets 322 (62) 1,252 0 411 5 1,928 Deferred variances (56) (39) (716) (4) (402) 3 (1,214) Minimum additional liability (see note 9) 946 Accruals for related benefits 6 247 253 Prepaid pension cost (see note 9) 127 Contractual termination indemnities 82 Insurance funding 231 Total provisions for pensions and other post-retirement benefits 2,353

AT DECEMBER 31, 2001 Projected benefit obligation 419 461 2,518 29 1,553 48 5,028 Plan assets 107 491 1,282 33 1,467 39 3,419 Benefits in excess of (less than) plan assets 312 (30) 1 236 (4) 86 9 1,609 Deferred variances (48) (5) (527) (6) (71) (2) (659) Minimum additional liability (see note 9) 130 Accruals for related benefits 6 297 303 Prepaid pension cost (see note 9) 372 Contractual termination indemnities 81 Total provisions for pensions and other post-retirement benefits 1,836

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Description of defined benefit plans Based on projected end-of-career salaries, the Group’s pension commitments amounted to €5,111 million at December 31, The Group’s main defined benefit plans are as follows: 2003, compared with €4,989 million at December 31, 2002 and In France, in addition to retirement bonuses, there are three €5,028 million at December 31, 2001. Out of this total, vested defined benefit schemes based on projected end-of-career rights (obtained by the beneficiaries of the retirement plans), salaries. These plans were closed to new employees by the calculated on the basis of current salaries, amounted to €4,476 companies concerned between 1969 and 1997. million (December 31, 2002: €4,338 million). They represent In Germany, retirement plans provide pensions and death and commitments to pensioners. disability benefits for employees. These plans have been closed to new employees since 1996. In the Netherlands, employees may still benefit from supple- Plan assets mentary pension plans. In the United Kingdom, employee retirement plans provide For defined benefit plans, plan assets are being progressively pensions as well as death and permanent disability benefits. built up by contributions, primarily in the United States and These defined benefit plans – which are based on employees’ the United Kingdom. Contributions paid by the Group totaled € € average salaries over their final years of employment – have 219 million in 2003 and 89 million in 2002. € been closed to new employees since 2001. The fair value of plan assets – which came to 3,167 million at € € In the United States and Canada, the Group’s defined benefit December 31, 2003 (2002: 3,061 million; 2001: 3,419 million) – schemes are based on projected end-of-career salaries. Since is deducted from the amount of the Group’s commitment January 1, 2001 new employees have been offered a mixed valued according to the projected unit credit method in order scheme based on both defined contributions and defined to calculate the related provision. benefits, known as the “Cash balance” scheme. Actuarial assumptions used for valuing pension Valuation of pension commitments commitments and plan assets and retirement indemnities Assumptions as to mortality, employee turnover and salary Pension commitments are determined by actuarial valuations projections take into account the economic conditions specific using a method based on projected end-of career salaries (the to each country and company. Interest rates used in 2003 to projected unit credit method). The method adopted complies determine the present value of future commitments were with both French generally accepted accounting principles and generally between 4% and 6.5%, depending on the country U.S. GAAP. concerned. The rates used in the countries in which the Group’s commit- ments are the most significant are as follows:

France Other European countries United States (percentagess Germany Netherlands United Kingdom Discount rate 5.20% 5.25% 5.20% 5.40% 6.50% Salary increases 2.40% 2.50% to 3.25% 2.50% 3.00% to 3.25% 3.00% Estimated yield on plan assets 5.50% 5.50% 5.75% 6.50% to 8.50% 8.75%

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Deferred variances Prepaid pension cost Deferred variances are primarily made up of actuarial gains When plan assets are in excess of accumulated benefits, calcu- and losses, as well as differences due to changes in pension lated based on current salary levels, an asset is recorded under plans and the first-time adoption of the standard by Group “Prepaid pension cost” under “Other non-current assets” (see companies. These variances result from year-on-year changes note 9). At December 31, 2003 this item amounted to €114 in the actuarial assumptions used to value commitments and million, versus €127 million in 2002 and €372 million in 2001. plan assets, as well as differences between actual market condi- tions and assumptions applied. Deferred variances amounted to €1,322 million at December 31, Contractual termination indemnities € € 2003 (2002: 1,214 million; 2001: 659 million) and are Provisions for contractual termination indemnities totaled €74 deducted from the provision for pensions and other post-retire- million at December 31, 2003 (2002: €82 million; 2001: €81 ment benefits. million). They include contractual termination indemnities They are amortized using the “corridor approach” (variances payable in certain countries, particularly Italy, when an exceeding 10 % of the present value of the defined benefit obli- employee leaves the Group on retirement or for other reasons. gation or the fair value of plan assets) over the average These indemnities are determined based on the calculation remaining service period or average remaining life expectancy methods applicable in the country concerned and are not € of the relevant beneficiary. Amortization in 2003 totaled 35 based on actuarial calculations. million, compared with €16 million in 2002.

Insurance funding Additional minimum liability This item corresponds to amounts payable in the future to In accordance with U.S. GAAP the Group recognizes a minimum insurance companies under the funded retirement schemes provision which represents pension commitments based on for Group employees in Spain. It amounted to €211 million at beneficiaries’ current salary, less any plan assets. December 31, 2003 and €231 million at December 31, 2002. The additional minimum liability represents the difference between this minimum provision and pension commitments calculated based on projected end-of-career salaries, less plan Pension charge assets and deferred variances. The pension charge is as follows: The additional minimum liability is recorded in provisions for pensions and other post-retirement benefits which leads to a 2003 2002 2001 corresponding entry in other non-current assets (see note 9). At December 31, 2003 the aggregate amount of the additional (in € millions) minimum liability was €1,067 million, compared with €946 Pensions and million in 2002 and €130 million in 2001. retirement indemnities: Vested rights 121 139 131 Interest 281 304 294 Accruals for related benefits Return on funds (265) (294) (295) Obligations for other post-retirement and post-employment Amortization of variances 27 16 9 benefits are determined by actuarial valuations. They are recog- Sub-total 164 165 139 nized in the same way as for pension obligations. At December 31, € Other post-retirement benefits: 2003 the provision amounted to 217 million, compared with 10 12 11 €253 million in 2002 and €303 million in 2001. Vested rights 21 22 23 The assumptions as to mortality, employee turnover and Interest interest rates used to determine future benefits are those used Amortization of variances 8 – 2 for the determination of the pension liability. In the United Sub-total 39 34 36 States, the annual growth rate for medical treatment received TOTAL PENSION CHARGE 203 199 175 by retirees has been set at 11.5%.

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iNote 17 - Provision for income taxes In 2003, the provision for income tax represented 36% of total Group income before tax (36% in 2002 and 38% in 2001). The Compagnie de Saint-Gobain is assessed for income tax effective tax rates are determined as follows: purposes on its consolidated fiscal income. A request has been made to renew the fiscal agreement which covered the years 2003 2002 2001 2001 to 2003, to cover the years 2004 to 2006. As a result of this agreement the Group’s share of the aggregate amount of (percentages 33 33 33 income taxes paid by Group companies included in the world- Current income tax rate wide tax group is taken into account when determining consol- Surcharge on French income tax 1 1 1 idated fiscal income. Technical assistance fees Also, under the terms of Article 223 et seq. of the General Tax and net capital gains taxed Code (Code Général des Impôts),Compagnie de Saint-Gobain at lower rates (1) (1) (2) has opted for the integrated tax (Intégration Fiscale) system in Other, including amortization addition to the consolidated tax system described above. of goodwill 3 3 6 The net income of companies included in the tax group is as EFFECTIVE RATE 36 36 38 follows:

2003 2002 2001 At December 31, 2003, the provision for deferred taxes recorded in the balance sheet can be analyzed as follows: (in € millions) Net income of companies 1,059 1,070 1,167 included in the tax group (in € millions) 595 612 721 Income tax expense At January 1, 2003 696 INCOME OF COMPANIES Movement for the year (33) INCLUDED IN TAX GROUP Translation adjustments (31) BEFORE INCOME TAXES 1,654 1,682 1,888 Effect of changes in Group structure and other (33) This income breaks down as follows: AT DECEMBER 31, 2003 599 2003 2002 2001 The principal components of the net deferred tax liability are as (in € millions) follows: French companies 774 656 948 Non-French companies 880 1,026 940 2003 2002 2001 INCOME OF COMPANIES (in € millions) INCLUDED IN TAX GROUP Pensions 167 204 229 BEFORE INCOME TAXES 1,654 1,682 1,888 Retail brands (359) (373) (349) (318) (365) (411) The provision for income tax is as follows: Depreciation Other (89) (162) (154) 2003 2002 2001 TOTAL NET DEFERRED (in € millions) TAX LIABILITY (599) (696) (685) Current taxes (628) (615) (701) France (269) (207) (274) Outside France (359) (408) (427) Deferred taxes 33 3 (20) France 49 (21) 3 Outside France (16) 24 (23) TOTAL PROVISION FOR INCOME TAX (595) (612) (721)

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iNote 18 - Other liabilities Provisions for contingencies and charges break down as follows by form and according to whether the related charges are included in operating or non-operating expense:

Immobilisation (in € millions) Additions to and reversals from Reversals Other provisions from Changes (reclassifications At Jan. 1, (surplus provisions in Group and translation At Dec. 31, 2003 provisions) (utilized) structure adjustments) 2003 2003 Provisions for operating contingencies and charges: Provision for customer warranties 160 43 (47) (9) 147 Provision for major repairs 13 3 (7) 1 10 Provision for personnel costs 92 29 (22) 1 (5) 95 Provision for other contingencies 136 24 (33) (3) (9) 115 Provisions for non-operating contingencies and charges: Provision for asbestos-related litigation 332 102 (6) (60) 368 Provision for environmental risks 66 4 (3) 3 (4) 66 Provision for restructuring costs 149 89 (97) 1 (8) 134 Provision for risks relating to subsidiaries and affiliates 15 3 (10) 5 13 Provision for unrealized foreign exchange losses 1 (1) Badwill 121 (51) 26 (12) 84 TOTAL 1,084 247 (226) 28 (101) 1,032 Impact (net of accrued charges) Operating income 99 Net financial income 1 Non-operating income and expense, net 198 Amortization of goodwill (51) TOTAL 247

mmobilisation (in € millions) Additions to and reversals from Reversals Other provisions from Changes (reclassifications At Jan. 1, (surplus provisions in Group and translation At Dec. 31, 2002 provisions) (utilized) structure adjustments) 2002 2002 Provisions for operating contingencies and charges: Provision for customer warranties 162 42 (42) (2) 160 Provision for major repairs 109 15 (22) (89) 13 Provision for personnel costs 109 23 (17) 1 (24) 92 Provision for other contingencies 261 11 (57) 1 (80) 136 Provisions for non-operating contingencies and charges: Provision for asbestos-related litigation 207 104 (15) 36 332 Provision for environmental risks 66 4 (3) 2 (3) 66 Provision for restructuring costs 196 57 (106) 9 (7) 149 Provision for risks relating to subsidiaries and affiliates 8 8 (9) 8 15 Provision for unrealized foreign exchange losses 2 (2) Badwill 135 (34) 20 121 TOTAL 1,255 230 (273) 41 (169) 1,084 Impact (net of accrued charges) Operating income 91 Non-operating income and expense, net 173 Amortization of goodwill (34) TOTAL 230

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mmobilisation (in € millions) Additions to and reversals from Reversals Other provisions from Changes (reclassifications At Jan. 1, (surplus provisions in Group and translation At Dec. 31, 2001 provisions) (utilized) structure adjustments) 2001 2001 Provisions for operating contingencies and charges: Provision for customer warranties 170 47 (68) 1 12 162 Provision for major repairs 125 (10) (27) 1 20 109 Provision for personnel costs 157 22 (16) 4 (58) 109 Provision for other contingencies 217 48 (80) 36 40 261 Provisions for non-operating contingencies and charges: Provision for asbestos-related litigation 197 16 (17) 11 207 Provision for environmental risks 80 (21) 7 66 Provision for restructuring costs 259 33 (126) 27 3 196 Provision for risks relating to subsidiaries and affiliates 12 (3) (2) 2 (1) 8 Provision for unrealized foreign exchange losses 1 1 2 Badwill 101 (25) 28 31 135 TOTAL 1,318 129 (356) 99 65 1,255 Impact (net of accrued charges) Operating income 107 Net financial income 1 Non-operating income and expense, net 46 Amortization of goodwill (25) TOTAL 129

Provisions for operating contingencies and charges Provisions for non-operating contingencies Additions to and reversals from these provisions are recorded and charges under operating income and expense. Additions to and reversals from these provisions are recorded Provision for customer warranties under non-operating expense and income. This provision covers the Group’s commitments in relation to Provision for asbestos-related litigation warranties granted to customers. The provision for asbestos-related litigation has been set up as Provision for major repairs a top-up to the Group’s insurance cover to provide for the costs of asbestos-related lawsuits issued against the Group. The Since 2002, this provision has been recorded to cover the costs provision covers the costs of lawsuits currently in progress as of demolition and scrapping of assets which require cyclical well as potential new claims. upgrades, particularly furnaces in the Group’s various opera- At December 31, 2003, the provision amounted to €368 million tions. compared with €332 million at December 31, 2002 and €207 € Provision for personnel costs million at December 31, 2001. A 102 million charge to this provision was recorded in 2003. Insurance settlements receiv- This provision mainly covers indemnities due to personnel able for accepted claims and amounts paid in advance totaled unrelated to reorganization operations. At December 31, 2003 €106 million at December 31, 2003 compared with €214 million € the provision totaled 95 million and primarily concerned at December 31, 2002 and €218 million at December 31, 2001. € North America ( 45 million) as well as Germany and Central These amounts are included in “Other non-current assets”. € Europe ( 30 million). Asbestos-related risks are described in further detail in note 31. Provision for other contingencies To the best of the Company’s knowledge, no litigation or arbi- tration is pending or in progress that is likely to have material At December 31, 2003 provisions for other contingencies impact on the consolidated assets and liabilities, financial € amounted to 115 million and essentially concerned France condition or results of the Group. (€27 million), Germany and Central Europe (€29 million), the United Kingdom and Ireland (€13 million) and North America (€17 million).

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Provision for environmental risks iNote 20 - Long-term and short-term debt This provision is intended to cover costs for environmental protection measures and site clean-ups. After a net charge to Breakdown of long-term and short-term debt the provision of €4 million during the year, it totaled €66 million at December 31, 2003, compared with €66 million at Long–term and short-term debt consist of the following: both December 31, 2002 and December 31, 2001. At December 31 Provision for restructuring costs (in € millions) 2003 2002 20011 Provisions for restructuring costs concern commitments in Long-term debt: relation to the reorganization of the Group’s operations. €89 Bond issues 5,748 5,273 4,196 million was charged to provisions for restructuring costs in Bank borrowings in euros 311 443 451 2003 and at December 31, 2003, they amounted to €134 million 110 170 198 (compared with €149 million at December 31, 2002 and €196 Medium Term Notes million at December 31, 2001). These provisions primarily Perpetual bonds 33 33 33 concern France (€25 million), Germany and Central Europe Other long-term debt (€56 million) and the Benelux countries (€21 million). Restruc- including capital leases 316 319 369 turing costs are described in note 25. Total long-term debt 6,518 6,238 5,247 Provision for risks relating to subsidiaries and affiliates Short-term debt: Current portion This provision is intended to cover financial risks in relation to of long-term debt 550 487 991 certain subsidiaries, particularly when the Group intends to divest these companies. After a net charge to the provision of Borrowings due in less € € than one year (US CP, 3 million during the year, it totaled 13 million at December 31, 485 636 1,491 2003, compared with €15 million at December 31, 2002 and euro CP and Billets de Trésorerie) €8 million at December 31, 2001. Bank overdrafts and other short-term bank borrowings 1,178 1,021 1,672 Total short-term debt 2,213 2,144 4,154 Provision for unrealized foreign exchange losses TOTAL DEBT 8,731 8,382 9,401 Changes in provisions for unrealized foreign exchange losses Short-term loans (160) (162) (245) impact net interest and other financial charges. Total marketable securities (1,387) (469) (406) Cash and cash equivalents (1,527) (739) (958) Badwill NET INDEBTEDNESS 5,657 7,012 7,792 Badwill is amortized on a straight-line basis over a period not exceeding 40 years. Liquidity risk management Net indebtedness came to €5.7 billion at December 31, 2003, iNote 19 - Other payables down €1.3 billion compared with one year earlier. The Group and accrued expenses increased the average maturity of its debt through a one billion issue of seven year bonds in April 2003 maturing in April 2010. € 2003 2002 2001 A 152 million bond issue matured and was redeemed in November 2003. (in € millions) Customer deposits 98 109 79 Income tax payable 221 138 277 Payable to suppliers of non-current assets 203 146 210 Grants 28 31 30 Accrued personnel expenses 777 770 756 Accrued taxes other than on income 272 242 254 Other * 757 912 1,195 TOTAL 2,356 2,348 2,801

* Including €77 million relating to cross-currency swaps at December 31, 2002 and €261 million at December 31, 2001.

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Maturities of long- and short-term debt are as follows: 2003 2002 2001 (in € millions) Private placement Bonds notes MTN Other Total 2003 –––––– 279 2004 –––––451 446 2005 1,138 74 31 107 1,350 1,345 1,372 2006 475 – 39 9 523 724 800 2007 1,316 223 40 24 1,603 1,687 – 2008 and beyond 2,819 14 – 176 3,009 1,998 2,317 Unspecified (including perpetual bonds) 33 33 33 33 Total long-term debt 5,748 311 110 349 6,518 6,238 5,247 Short-term debt (1) 257 1 40 1,915 2,213 2,144 4,154 TOTAL DEBT 6,005 312 150 2,264 8,731 8,382 9,401

(1) Including portion of long-term debt due in less than one year.

Undrawn confirmed credit lines Bank borrowings Compagnie de Saint-Gobain’s US Commercial Paper, Euro- All bank borrowings are immediately repayable in the event of: Commercial Paper, Billets de Trésorerie and Medium Term •default on any installment, Notes programs are backed by two confirmed syndicated lines • default on any other borrowings in excess of a certain of credit of €600 million and €1,200 million, expiring in amount. September 2006 and November 2007 respectively, as well as Certain loan agreements also include covenants relating to 11 bilateral credit lines totaling €586 million at December 31, shareholders' equity.The seven bank loan agreements to which 2003. these covenants apply represent €76 million out of a total of No drawdowns were made against any of these credit lines in €312 million in bank borrowings. The most restrictive of these 2003. Commitment fees amounted to €3.2 million, compared covenants requires the Group to have shareholders’equity of at with €2.5 million in 2002. least €2.9 billion, and concerns a loan of €22.9 million. The loan agreements include various covenants which, if violated, would result in the facilities becoming immediately repayable or being withdrawn. Financing programs These covenants are as follows: The Group has a number of programs available for medium- € •for four bilateral credit lines representing 317 million and the term and long-term (Medium Term Notes) and short-term € two syndicated credit lines: ratio of net debt ( 5,657 million – (Commercial Paper and Billets de Trésorerie) financing. € see above) to cash flow from operations ( 2,471 million – see The Medium Term Notes program was renewed in 2003. The consolidated cash flow statement) capped at 4 or 3 and/or an prospectus defines the Medium Term Notes as bonds and the interest cover ratio of over 2, i.e. the coverage of consolidated amount of the program was increased to €2,500 million. net interest expense by consolidated net income before tax and net interest expense (€457 million – see note 24). At December 31, 2003, the Group's ratio of net debt to cash flow from operations was 2.3 and its interest cover ratio was 4.6, •default on bank borrowings capped at a certain level, •for a €119 million bilateral credit line: Material Adverse Change clause. This clause allows the banking counterparty to with- draw the credit line in the event of a material adverse change in the Group’s business environment.

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At December 31, 2003, the situation of these programs was as follows:

Programs (in millions of currency) Authorized Cur- Drawdown ceilings at Drawn down at Drawn down at Drawn down at rency period Dec. 31, 2003 Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2001 Medium Term Notes EUR 1 to 30 years 2,500 150 216 539 US commercial paper USD up to 12 months 1,000 * 029307 Euro commercial paper USD up to 12 months 1,000 * 0 100 152 Billets de trésorerie EUR up to 12 months 1,500 485 513 971 (*) Equivalent to €792 million based on the exchange rate at December 31, 2003.

Billets de Trésorerie, Euro-Commercial Paper and US-Commer- Interest rate risk management cial Paper issues generally have a life of 1 to 6 months. In view of their frequent renewal the Group treats them as variable rate Details of the main financial instruments used by the Group debt. are provided below. Details of outstanding Medium Term Notes are described Bond issues below. The €6,005 million worth of outstanding bonds (short- and long-term) break down as follows at December 31, 2003. Collateral At December 31, 2003 €32 million in Group debt were secured by various non-current assets (real estate and securities).

Maturity 2004 2005 2006 2007 2008 2009 2010 Total (in € millions) EUR Fixed rate 500 920 607 1,000 450 3,477 Variable rate 550 550 USD Fixed rate 475 475 Variable rate 396 396 GBP Fixed rate 426 426 Variable rate 212 212 424 CHF Fixed rate 257 257 TOTAL 257 1,138 475 1,316 819 1,000 1,000 6,005 Fixed rate 100% 81% 100% 70% 74% 100% 45% 77%

All of the bonds were issued at fixed rates. The term “Variable At December 31, 2003, Compagnie de Saint-Gobain had not rate” in the table above refers to fixed rate bonds that have used its entitlement to repurchase any of the OCEANE bonds. been converted into variable rate debt through the use of Moreover, none of the bondholders had requested to convert or swaps. exchange their bonds for Compagnie de Saint-Gobain shares in In addition, the bond issues in Swiss francs maturing on accordance with the exchange ratio of one bond for four shares. January 7, 2004 are hedged by cross-currency swaps (see note 21 Therefore if all of the bonds were converted at the price dealing with Cross-currency Swaps). provided for in the issue agreement, the holders would receive On February 18, 2002, Compagnie de Saint-Gobain issued a total of 17,523,812 shares, representing 5.04% of the Company’s 4,380,953 “OCEANE”bonds that are convertible into new shares capital at December 31, 2003. or exchangeable for existing shares and which mature on January 1, 2007.These bonds have a nominal value of €210 each, and the total issue came to €920 million. The annual interest rate for these “OCEANE” bonds is 2.625% payable in arrears on January 1 each year.

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Bank borrowings The €312 million worth of private placement notes (current- and long-term portions) break down as follows at December 31, 2003.

2004 2005 2006 2007 2008 Total (in € millions) EUR Fixed rate 1009214 107 Variable rate 0690131 0 200 NOK Fixed rate 050005 TOTAL 1740223 14 312 Fixed rate 100% 7% 0% 41% 100% 36%

The term “Variable rate” in the table above corresponds to private placement notes issued at variable rates and fixed rate notes converted into variable rate debt through the use of swaps. Medium-Term Notes The €150 million worth of outstanding Medium-Term Notes (current- and long-term portions) break down as follows at December 31, 2003.

2004 2005 2006 2007 Total (in € millions) EUR Fixed rate 00000 Variable rate 21 08029 USD Fixed rate 19 0 0 40 59 CZK Fixed rate 03131062 TOTAL 40 31 39 40 150 Fixed rate 48% 100% 79% 100% 81%

The term “Variable rate” in the table above corresponds to Bank overdrafts and other short-term bank borrowings Medium Term Notes issued at variable rates and fixed rate This item includes bank overdrafts, local short-term bank Notes converted into variable rate debt through the use of borrowings taken out by subsidiaries and accrued interest on swaps. short-term debt. In addition, Medium Term Note issues in euros have been hedged by cross-currency swaps on a notional amount of €21 million maturing in 2004 (see note 21 dealing with Cross- iNote 21 - Financial instruments Currency Swaps).

Perpetual bonds Interest rate risk management In 1985, Compagnie de Saint-Gobain issued €125 million worth of perpetual bonds – 25,000 bonds with a face value of €5,000 Interest rate risk relating to the Group's total net indebtedness – paying interest at a variable rate indexed against Libor.These is managed by the Treasury Department of Compagnie de securities are not redeemable and the interest paid on them is Saint-Gobain. Net indebtedness is determined by means of a included in financial charges. monthly reporting system which provides a detailed break- At December 31, 2003, 18,496 perpetual bonds had been bought down of each subsidiary’s debt by type and by interest rate back and canceled. At that date, 6,504 perpetual bonds were (fixed or variable). In addition, for the preparation of the interim outstanding, representing a total nominal amount of €33 and annual consolidated financial statements, subsidiaries also million. provide a breakdown of debt between long- and short-term and fixed and variable rate, together with details of interest rates and hedging instruments by line of debt. Where subsidiaries use derivatives to hedge risk on debt, Compagnie de Saint-Gobain, the Group parent company, is the exclusive counterparty.

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The main objective of managing overall interest rate risk on the The average interest rates for material long-term debt items Group's consolidated net debt is to fix the cost of the medium- before hedging are as follows: term debt and to optimize annual borrowing costs.The Group's policy defines which derivative financial instruments can be 2003 2002 2001 used to hedge the debt. Derivative financial instruments may (in € millions) include rate swaps, options – including caps, floors and swap- Average interest rate tions – and forward rate agreements. These instruments are on outstanding debt traded over-the-counter with counterparties meeting at December 31 minimum rating standards as defined in the Group’s financial Bond issues 5.01% 5.11% 5.74% policy. Medium Term Notes 4.83% 5.01% 3.70% Private placement notes 3.95% 4.30% 4.48% Perpetual bonds 2.46% 3.44% 3.68%

The following derivative instruments are used by the Group: Interest rate swaps

The notional amount of interest rate swaps breaks down as follows at December 31, 2003:

Fixed rate borrower Variable rate borrower (in € millions) EUR USD GPB Total EUR USD GBP Total 2004 – 137 – 137 –––– 2005 ––––––213 213 2006 3 ––3 –––– 2007 ––––40 396 – 436 2008 ––––––213 213 2009 –––––––– 2010 ––––550 ––550 TOTAL 3 137 – 140 590 396 426 1,412

Cross-Currency Swaps • euros swapped for foreign currencies to finance subsidiaries The Group uses two types of Cross-Currency Swaps: in the United States and the United Kingdom. The Group has • Swiss francs swapped for euros: the Group's fixed rate bonds swapped euro-denominated debt for debt in US dollars and in Swiss francs (maturing in January 2004) have been swapped sterling. for variable rate euro-denominated debt (with the same matu- Maturities of the Group's cross-currency swaps are presented rity); below.The amounts shown correspond to the notional amount of the original euro leg of the swap, in millions of euros.

(in € millions) Received Fixed CHF Variable EUR Fixed EUR Fixed EUR Variable EUR Variable EUR Paid Variable EUR Variable USD Variable USD Fixed USD Fixed USD Fixed GPB Total 2004 246 7 15 30 30 328 2005 297 297 2006 138 138 2007 – 2008 – 2009 49 49 TOTAL 246 7 15 187 327 30 812

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Currency swaps Group debt structure, after interest rate hedges The Group uses currency swaps as part of its day-to-day cash The weighted average interest rate on total debt after giving management. At December 31, 2003, currency swaps amounted effect to hedging instruments (cross currency swaps, rate to €595 million. swaps and caps) was 4.3% for the year ended December 31, 2003 (4.7% in 2002 and 5.0% in 2001). Options After giving effect to in-the-money options and other hedging In addition, the Group had options (interest rate caps) on a instruments, at December 31, 2003 97% of Group debt was at notional amount of €90 million which were out of the money fixed rates of interest and 3% was at variable rates. at December 31, 2003. Net debt at December 31, 2003 before and after the effect of The face value amount of commitments given and received in rate swaps, cross-currency swaps and currency swaps (i.e. the form of swaptions and early repayments of borrowings including and excluding the impact of hedges), was in the amounted to €138 million and €40 million respectively. following currencies:

Net debt in: Before hedging After hedging (in € millions) Variable rate Fixed rate Total Variable rate Fixed rate Total EUR (1,128) 4,370 3,242 (390) 3,581 3,191 USD (115) 946 831 (126) 1,184 1,058 GBP 167 856 1,023 594 459 1,053 CHF (4) 257 253 (69) 3 (66) Other currencies 72 115 187 157 115 272 TOTAL (1,008) 6,544 5,536 166 5,342 5,508 Accrued interest 149 NET INDEBTEDNESS 5,657

Including the effect of derivatives and at the year-end rate, total Effect of an increase in interest rates debt was €28 million lower than the figure excluding deriva- At December 31, 2003, a 1% increase in interest rates would tives. The difference corresponds to the exchange-rate impact increase the Group’s net interest expense and other financial of cross-currency swaps (€28 million). charges by €6.02 million in 2004 (including the effect of deriv- Its contra entry is the revaluation difference on assets financed atives), assuming that the total amount of debt remains stable in the target currency (example: assets in dollars for a cross- and decreases in fixed-rate debt are offset by matching currency swap to lend euros and borrow dollars). increases in variable-rate debt.This increase takes into account Fair value of derivative instruments the cost of the securitization program in the United States. The fair value of derivative financial instruments used by the Group is as follows (excluding accrued interest): Maturities of debt and cash and cash equivalents

Type of instrument Fair value The table below sets out the maturities at December 31, 2003 of (in € millions) gross debt and cash and cash equivalents both before and after hedging. The maturity date indicated for assets and debt at Interest-rate swaps 34.5 (7.5) adjustable rates is the interest rate adjustment date. The net Cross-currency swaps interest rate position is the net of the lender and borrower 0.1 Purchased caps positions. Currency options 0.9 Energy swaps and futures 1.3 2003 2002 2001 (in € millions) Between The negative amount of €7.5 million shown for cross currency Within 2 and Over swaps represents the cost of replacing these swaps on the one year 5 years 5 years market at year-end (including the €28 million exchange-rate Gross debt 2,541 4,110 2,108 impact of cross-currency swaps described above). However, the Cash and cash equivalents (3,074) –– swaps were acquired for hedging purposes and are intended to NET DEBT BEFORE HEDGING (533) 4,110 2,108 be retained until maturity. Any exchange loss or gain on the swaps at maturity will be offset by a corresponding gain or loss Derivatives 1,096 (565) (559) on the hedged instruments. NET DEBT AFTER HEDGING 563 3,545 1,549

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Marketable securities Energy risk management Marketable securities include units in SICAV and other mutual The Group hedges part of its natural gas purchases in the funds recorded at the lower of cost and market. All of these United States using fixed-rate borrower/variable rate lender securities have variable interest rates. swaps on the NYMEX and also on the futures market. Financial transactions such as purchases and sales of Outstanding swaps at December 31, 2003 had a fair value of marketable securities and currency or interest rate hedging €1.28 million. instruments, are carried out with diversified and high-quality In addition, the Group has launched a hedging program to counterparties. Credit risk is therefore low. The choice of coun- cover heating oil costs of some of its European subsidiaries.The terparties as well as the determination of position limits by hedges consist exclusively of fixed-rate borrower/variable-rate counterparty is part of a rigorous and selective process. lender swaps based on various Platt's references. At December 31, 2003, there were no such outstanding swaps. Foreign currency risk management Equity risk management Commercial transactions The Group is not exposed to equity risk, as it always favors The Group's policy on currency risk consists of hedging money-market funds and/or bonds when purchasing mutual commercial transactions carried out by Group entities in funds or equivalents, and is therefore not exposed to any equity currencies other than their functional currencies. Compagnie risk on its short-term investments. de Saint-Gobain and its subsidiaries may use options and The Group previously held a portfolio of shares in listed compa- forward contracts to hedge exposure arising from commercial nies. All of these shares have been sold, apart from 5.3 million transactions. Vivendi Universal shares. These shares are carried in the Subsidiaries are not authorized to enter into option contracts balance sheet at their historical cost of €13.88 per share, repre- with external counterparties. Instead, options are set up exclu- senting a total of €74 million. sively with Compagnie de Saint-Gobain, the parent company of the Group, which then takes a reverse position on the market. Most forward contracts are for periods of around three months. Securitization of receivables However, forward contracts taken out to hedge firm orders may have terms of up to two years. Subsidiaries are authorized to and off balance sheet commitments enter into forward contracts with their banks for periods of less The Group has set up a US$550 million receivables securitiza- than two years. tion program through its US subsidiary, CertainTeed Receiv- The majority of transactions are hedged, invoice by invoice or ables Corporation, expiring in July 2008. Under this program, order by order, with Saint-Gobain Compensation, the entity set receivables of the US subsidiaries are sold to a bank at daily up to manage the Group’s currency risks. Saint-Gobain intervals, on a no-recourse basis. The bank then refinances the Compensation hedges these risks solely by means of forward receivables through commercial paper issues. The amount purchases and sales of foreign currencies. This enables compa- received by the subsidiaries corresponds to a variable nies to hedge exposure arising from commercial transactions percentage of the face value of the receivables, determined as soon as the risk emerges. Saint-Gobain Compensation mainly by reference to the interest rate on the bank's commer- reverses all its positions with Compagnie de Saint-Gobain and cial paper issues. The sold receivables amounted to €368 does not therefore have any open positions. million at December 31, 2003 (2002: €385 million; 2001: €433 The exposure of other Group companies to currency risks is million). hedged with Compagnie de Saint-Gobain as soon as the latter The difference between the face value of the sold receivables receives orders sent by the subsidiaries or by cash pools of the and the proceeds received from the bank is treated as interest National Delegations. Exposure may also be hedged with the expense. In 2003, the amount recorded as interest expense banks of the subsidiaries concerned. Total unhedged transac- came to US$ 7.5 million (2002: US$ 8.8 million; 2001: US$ 18.7 tions for these companies amounted to €24 million at million). December 31, 2003. If the euro dropped by 1 cent against the The main events which could cause the program to be termi- Group’s trading currencies, the impact would be less than nated are a change in Compagnie de Saint-Gobain's rating to €1 million, which is not material at the level of the consolidated below investment grade or default on any amounts due to the financial statements. bank under the program. At December 31, 2003 the Group had options to purchase USD The guarantee given by Compagnie de Saint-Gobain under this for EUR for a nominal amount of €26.4 million. program is recorded as an off balance sheet commitment in an amount of US$ 550 million at December 31, 2003. Financial transactions Hedging of financial transactions is managed on a case-by- case basis, for example for acquisitions in foreign currency, repatriation of dividends or capital contributions to subsidiaries. Option-based strategies are generally used in these cases. At December 31, 2003, the Group’s portfolio did not contain any of these options.

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iNote 22 - Research and development As in 2002, provisions for contingencies in 2003 primarily and advertising costs included the asbestos-related charge explained in notes 18 and 31. Selling, general and administrative expenses include research Reorganization costs mainly related to Flat Glass (Solaglas Ltd € € € and development costs of 306 million, 312 million and 320 and the Division’s German entities), Building Materials Distrib- million for the years ended December 31, 2003, 2002 and 2001, ution (Raab Karcher in Germany and the Netherlands and respectively. Saint-Gobain Building Distribution Ltd) and Abrasives (Saint- € € Advertising costs amounted to 184 million in 2003, 209 Gobain Abrasives North America, Saint-Gobain Abrasives UK € million in 2002 and 222 million in 2001. and Saint-Gobain Abrasifs France). In 2002, reorganization costs mainly related to Flat Glass (Cristaleria de Hortaleza), Insulation (including the costs iNote 23 - Other operating relating to the Europe-wide reorganization of Saint-Gobain expenses and income Isover's research centers), and Ceramics & Plastics (Saint- Gobain Céramiques Avancées Desmarquest). 2003 2002 2001 In 2001, reorganization costs mainly related to Flat Glass (Saint- (in € millions) Gobain Glass France), Insulation & Reinforcements (Saint- Pension and other post-retirement Gobain Isover G + H), Pipe (Saint-Gobain PAM) and Ceramics benefit costs (see note 16) (203) (199) (175) and Abrasives (Saint-Gobain Ceramic Materials Canada, Saint- Gobain Ceramics & Plastics, Saint-Gobain Performance Plastics Amortization of other and Bay State). intangible assets (76) (76) (72) Employee profit-sharing (127) (134) (126) Income from miscellaneous sales i 147 99 130 Note 26 - Profit on sales and other income and expenses of non-current assets TOTAL OTHER OPERATING EXPENSES, NET (259) (310) (243) In 2003, total profit on sales of non-current assets came to €86 million. Capital gains made – particularly on the sale of the Terreal group and of 7 million Vivendi Universal shares – were iNote 24 - Interest and other financial partly offset by capital losses on disposals and asset write- downs. charges, net In 2002, capital gains made on the disposal of certain non- 2003 2002 2001 strategic Group assets were almost totally offset by capital losses and asset write-downs. (in € millions) In 2001, net profit on sales of non-current assets mainly Interest on non-voting concerned capital gains on the disposal of the Group's entire participating securities (24) (26) (27) stake in BNP Paribas, less asset write-downs and capital losses Interest expense (412) (446) (542) recorded by the Lapeyre Group. Other financial charges (80) (103) (170) Interest income 54 69 108 i Other financial income 13 18 41 Note 27 - Net income excluding profit Net (losses) gains on sale of non-current assets (8) (16) (13) on foreign exchange For 2001, the number of shares and earnings per share TOTAL INTEREST AND OTHER excluding capital gains have both been adjusted to reflect the FINANCIAL CHARGES, NET (457) (504) (603) impact of the four-for-one stock split of June 27, 2002. Net income for the year amounted to €1,039 million in 2003, Total interest capitalized amounted to €2.5 million, €2.0 compared with €1,040 million in 2002 and €1,134 million in million, and €0.2 million for the years ended December 31, 2001. 2003, 2002, and 2001 respectively. Net income excluding profit on sales of non-current assets amounted to €1,020 million in 2003, versus €1,051 million in iNote 25 - Non-operating 2002 and €1,057 million in 2001. Based on the 347,824,967 expenses and income shares outstanding at December 31, 2003 (2002: 341,010,680; 2001: 341,034,512), earnings per share (EPS) excluding capital 2003 2002 2001 gains amounted to €2.93 in 2003 (2002: €3.08; 2001: €3.10). (in € millions) The difference between net income and net income excluding profit on sales of non-current assets reflects the combined Provisions for contingencies (109) (116) (13) impact of €86 million in capital gains on sales of assets in Reorganization costs: 2003 (2002: €3 million; 2001: €84 million), the related tax effect (32) (53) (26) •France (2003: €69 million; 2002: €15 million; 2001: €32 million) and •Other European countries (110) (60) (56) minority interests related to the assets (2003: €2 million; 2002: •North America (18) (15) (24) €1 million; 2001: €25 million). •Rest of the world (4) (3) (10) Other (2) (5) 7 TOTAL NON-OPERATING EXPENSES AND INCOME (275) (252) (122)

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iNote 28 - Stock-based plans Movements relating to stock options outstanding in 2001, 2002 and 2003 are listed below: Stock option plans on Compagnie de Saint-Gobain shares Shares Average exercise Compagnie de Saint-Gobain has stock option plans available to price certain employees, and a Group Savings Plan (“PEG”), or (in euros) employee stock purchase plan. Options outstanding The stock option plans allow the Board of Directors to grant at December 31, 2000 8,298,424 32.81 options which allow the holder to obtain Saint-Gobain shares Options granted 3,774,800 40.22 at a price based on the average share price for the 20-day Options exercised (701,592) 22.25 period preceding the date of grant. Discounts of 10% and 5% on (83,092) 36.63 this average price were granted in 1997 and 1998 respectively. Options forfeited Such discounts were discontinued in 1999. Options outstanding Options vest over a period of two, three, four or five years with at December 31, 2001 11,288,540 35.92 full vesting occurring at the end of the vesting period. Options Options granted 3,785,500 23.53 must be exercised within eight or ten years from the date of Options exercised (334,456) 23.15 grant and all rights to options are forfeited if the employee Options forfeited (164,520) 39.87 terminates employment with the Group. Options outstanding In 1996 and 2003, these plans involved subscription options for at December 31, 2002 14,575,064 32.95 new shares and between 1997 and 2002 purchase options on 3,717,700 35.67 existing shares held in treasury stock for this purpose. Options granted (619,310) 24.14 Further to the four-for-one stock split of June 27, 2002, the Options exercised number of options at December 31, 2001 has been multiplied by Options forfeited (80,000) 23.53 four in order to permit meaningful year-on-year comparisons. OPTIONS OUTSTANDING AT DECEMBER 31, 2003 17,593,454 33.88

At December 31, 2001, 2002 and 2003, 2,130,560, 3,413,064 and 5,114,854 options were exercisable at exercise prices ranging from €25.43 to €34.18. At December 31, 2003, 6,512,620 options were available for grant under the authorization given by the General Meeting of June 5, 2003.

The following table summarizes information about stock options outstanding at December 31, 2003:

Options exercisable Options not exercisable Date Exercise Number Average Exercise Number Total Type of price of options remaining price of options options of grant contractual outstanding options life in Number (in euros) months (in euros) of options 1996 21.42 355,700 11 355,700 Subscription 1997 28.47 773,874 23 773,874 Purchase 1998 29.54 1,038,880 35 1,038,880 Purchase 1999 40.63 1,167,700 71 40.63 503,200 1,670,900 Purchase 2000 37.69 1,778,700 83 37.69 859,000 2,637,700 Purchase 2001 40.22 95 40.22 3,694,800 3,694,800 Purchase 2002 23.53 107 23.53 3,703,900 3,703,900 Purchase 2003 35.67 119 35.67 3,717,700 3,717,700 Subscription TOTAL – 5,114,854 12,478,600 17,593,454 –

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Group Savings Plan (PEG) of Compagnie Contractual obligations de Saint-Gobain Commitments under capital leases For 2001, the figures relating to the number of shares and the Non-current assets acquired under capital leases are capital- average price have both been adjusted to reflect the impact of ized in the consolidated financial statements and the related the four-for-one stock split of June 27, 2002. liability is recorded in the balance sheet. The PEG employee stock purchase plan is open to all Group In 2003, €147 million of minimum future lease payments due employees in France and in most other European countries under capital leases corresponded to land and buildings who have completed a minimum of three months’service with compared with €124 million in 2002.Total commitments under the Group.The plan offers shares to eligible employees at a 20% capital leases increased to €141 million in 2003, from €117 discount from the average price quoted for the shares for the million in 2002. 20-day period preceding the date of the meeting of the Board of Directors at which the Plan is set. 2003 2002 Employees can invest for a five or ten-year term. Over this (in € millions) period, employees may not sell their shares, barring exceptional Minimum future lease payments : circumstances. 21 20 Under the PEG, the Group issued 6,499,407, 4,703,396 and • Within one year 65 62 3,612,600 shares to employees in 2003, 2002, and 2001, respec- • Between one and five years tively, at an average price per share of €21.14 in 2003, €33.88 in • Beyond five years 68 49 2002 and €33.25 in 2001. Total 154 131 Less estimated executory costs included in capital leases –– Stock option plan on Lapeyre shares Total minimum future lease payments 154 131 Transactions during 2001, 2002, and 2003 relating to stock Less interest costs (48) (46) options granted by Lapeyre are listed below: PRESENT VALUE OF NET MINIMUM LEASE PAYMENTS 106 85

Shares Average Obligations under operating leases exercise price The Group leases equipment and office, manufacturing and (in euros) warehouse space under various non-cancelable operating Options outstanding leases. Lease terms generally range from 1 to 9 years. Certain at December 31, 2000 72,000 31.16 contracts contain renewal options for various periods of time Options exercised (29,100) 29.89 and contain clauses for payment of real estate taxes and insur- ance. In most cases, management expects that in the normal Options outstanding course of business, leases will be renewed or replaced by other at December 31, 2001 42,900 32.01 leases. (42,900) 32.01 Options exercised Net rental expense was €387 million in 2003 (2002: €386 Options outstanding million; 2001: €348 million), corresponding to rental expenses at December 31, 2002 0 – of €406 million (2002: €411 million; 2001: €373 million) less €19 million of subletting revenue (2002 and 2001: €25 million). No options for Lapeyre shares have been exercisable since Future minimum commitments under non-cancelable oper- December 31, 2002. ating leases as well as contingent rent do not represent mate- rial amounts for the Group. iNote 29 - Off balance sheet commitments: contractual obligations and commercial commitments Contractual obligations and commercial commitments are described in the note below, except for off-balance sheet commitments related to debt and financial instruments which are explained in notes 20 and 21. The Group has no other material off-balance sheet commit- ments.

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Future minimum commitments under operating leases are as follows:

(in € millions) Payments due Total within between one beyond Total 2003 one year and five years five years 2002 Operating leases: •Rental expense 1,596 321 819 456 1,845 •Subletting revenue (107) (16) (44) (47) (128) TOTAL 1,489 305 775 409 1,717

Other contractual obligations Non-cancelable purchase commitments include commitments to purchase raw materials and services, as well as non-cancelable orders for fixed assets.

(in € millions) Payments due Total within between one beyond Total 2003 one year and five years five years 2002 Non-cancelable purchase commitments: •Non-current assets 39 38 1 33 •Raw materials 167 114 52 1 146 • Services 149 57 56 36 102 • Other 77 60 13 4 64 TOTAL 432 269 122 41 345

The Group has also received guarantees, amounting to €48 million in 2003, versus €60 million in 2002.

Commercial commitments

(in € millions) Payments due Total within between one beyond Total 2003 one year and five years five years 2002 Discounted bills 9 9 12 Security for borrowings 8 5 3 16 Other commitments given 126 32 30 64 122 TOTAL 143 46 33 64 150

The Group held €40 million of receivables secured by guarantees at December 31, 2003, compared with €31 million at December 31, 2002. Out of the 2003 total, €5.5 million concerned guaranteed receivables related to Pipe and Ceramics & Plastics export contracts. The majority of these commitments have a term of less than one year.

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iNote 30 - Workforce Everite and Saint-Gobain PAM were held liable for the payment and personnel expenses of €1.4 million in compensation in the 8 other lawsuits. Out of the 297 lawsuits outstanding against Everite and Saint- Gobain PAM at December 31, 2003, the merits of 101 have been Average headcount and corresponding decided but the compensation awards have not yet been made, personnel expenses pending issue of medical reports. The employer company has been held liable to pay compensation in only one of the cases. 2003 2002 2001 In the other 100 the Social Security authorities were ordered to AVERAGE NUMBER pay the compensation for the victims for the same procedural reasons described above (statute of limitations, liability issues OF EMPLOYEES (“inopposabilité”). Fully consolidated companies: Out of the 196 remaining lawsuits, 4 were dismissed in 2003 as 16,391 15,54 15,852 Managers a claim was made to the French Asbestos Victims Compensa- Supervisors 64,986 63,319 62,164 tion Fund (FIVA). At December 31, 2003 the procedures relating Other employees 88,420 90,368 93,159 to the merits of the other 192 cases were at different stages: SUB-TOTAL 169,797 169,641 171,175 21 are involved in administrative proceedings with the French Social Security authorities, 65 are pending with the Social Secu- Proportionately consolidated rity courts, appeals have been issued to the Court of Appeal in companies: 88 cases in which the employers were held liable for inexcus- 40 32 38 Managers able fault (including 64 cases in which statute of limitations Supervisors 607 531 200 and/or liability issues have been raised as mentioned above) Other employees 1,240 1,052 763 and 18 cases have been appealed to the Cour de Cassation by SUB-TOTAL 1,887 1,615 1,001 the French Social Security authorities in relation to procedural matters. 171,684 171,256 172,176 TOTAL In addition, at December 31, 2003, 71 suits based on inexcusable fault had been filed by current or former employees of nine 2003 2002 2001 other French companies in the Group, in particular involving (in € millions) PERSONNEL EXPENSES circumstances where equipment containing asbestos had been REMUNERATION used to protect against heat from furnaces. (INCLUDING SOCIAL SECURITY In 2003, 9 suits were dismissed at the request of employees or CONTRIBUTIONS) 6,277 6,465 6,519 former employees further to claims made to the Asbestos Victims Compensation Fund. At December 31, 2003, 16 lawsuits were completed: 9 through Remuneration of directors and corporate officers judgments by the Cour de Cassation which dismissed appeals issued by employees or former employees against Court of The total direct and indirect remuneration received by Corpo- Appeal decisions dismissing the claims of inexcusable fault, rate Officers from Group companies in France and abroad 4 through judgments issued by the Social Security courts and 3 € € amounted to 12.7 million in 2003, 13 million in 2002 and by Court of Appeal decisions finally dismissing employees’ € 12.9 million in 2001. The gross variable portion included in claims. € these remuneration amounts came to 4.5 million in 2003, For the 46 suits outstanding at the end of 2003, 6 are in the € € 4.6 million in 2002 and 4.7 million in 2001. investigation stage by the French Social Security authorities, € Attendance fees paid to Directors for 2003 amounted to 0.5 29 are pending before the Social Security courts and 11 before € € million (2002: 0.5 million; 2001: 0.5 million). the Court of Appeal.

In accordance with a law dated December 23, 2000 a fund has iNote 31 - Litigation been created in France known as the FIVA. It is intended to fully compensate the loss of persons officially recognized as having In France, further lawsuits were filed in 2003 by former contracted occupational diseases caused by asbestos, as well as employees (or persons claiming through them) of Everite and of all persons who have been exposed to asbestos on French Saint-Gobain PAM (“the employers”) – which in the past had territory. Any person who makes a claim to and accepts an offer carried on fiber-cement operations – for asbestos-related occu- of compensation from the fund will be barred from taking legal pational diseases, with the aim of obtaining supplementary action to obtain other compensation on the same grounds. compensation over and above the assumption of occupational However, once the applicant has accepted an offer of compen- diseases compensation by the French Social Security. A total of sation, the fund must make a subrogated claim against any 461 such lawsuits have been issued against the two companies employer considered to be responsible for the loss concerned. since 1997. On January 27, 2003 the fund published guidelines in the form At the end of 2003, 164 of these 461 lawsuits had been of a compensation scale. completed both in relation to liability and quantum. In all of At December 31, 2003, as mentioned above, as far as the these cases, the employers were held liable on the grounds of Company is aware, 13 employees or former employees of French “inexcusable fault”. However, in 156 of these 164 rulings, the Group companies had discontinued lawsuits filed in order to Social Security authorities were ordered to pay the compensa- make a claim to the Asbestos Victims Compensation Fund. tion for the victims for procedural reasons (statute of limita- tions, liability issues (“inopposabilité”).

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Overview of asbestos-related litigation The average individual cost of settlement based on all claims in the United States settled increased to approximately US $2,100 in 2003, from US $1,955 a year earlier. In the United States, three Group companies that once manu- factured products containing asbestos such as fiber-cement Impact on the Group’s results pipes, roofing products or specialized insulation, are facing The Group recorded a €100 million charge in 2003 to make legal action from persons other than the employees or former provision for future developments in relation to these claims, employees of the companies. The claims are based on alleged including €50 million recorded in the first half of the year. exposure to the products although in the vast majority of cases The same charge was recorded in 2002. At December 31, 2003 the claimants cannot demonstrate any specific exposure to the Group’s total cover for asbestos-related claims against one or more products, or any specific illness or physical CertainTeed in the United States amounted to €341 million (US disability. The majority of these claims are made simultane- $431 million), comprised of insurance coverage available at that ously against many other non-Group entities which have been date and the provision referred to above, compared with €426 manufacturers, distributors, installers or users of products million at December 31, 2002 (US $446 million). containing asbestos. CertainTeed, the main US subsidiary involved in these cases, Cash flow impact was for a long period a member of the Center for Claims Reso- Total compensation paid for these cases – including claims lution, an organization which grouped together defendants settled in 2002 but paid out in 2003, and those fully settled and facing the same type of claims and handled the defense of all paid in 2003 – amounted to €135 million in 2003 (US $153 such claims. The organization also allocated court awards, million), versus €109 million (US $103 million) in 2002. US $148 negotiated out of court settlements and defense costs among million of this amount has been or will be covered by insur- its members on the basis of a pre-agreed pro-rata formula. ance. Since February 1, 2001 the organization no longer represents its members in this way, and CertainTeed now assumes directly Outlook for 2004 the defense of claims made against it, which have increased Although trends relating to the number of new suits have been significantly since 2001. favorable since the third quarter of 2003, the most significant Developments in 2003 drop has been in “mass claims” which generally have a lower average cost of claims settled than the overall average figure. 2001 and 2002 were marked by sharp increases in new lawsuits Therefore, unless the current trends change again, the average filed against CertainTeed with 60,000 and 67,000 new cases cost of claims settled is expected to increase in the future, most filed respectively, compared with 19,000 in 2000. In 2003, likely from 2004 onwards. approximately 62,000 new suits were filed, including some If the bill currently being considered by the US Senate is 29,000 in Mississippi. This exceptional surge in claims filed in adopted, claimants will no longer be able to file the sort of Mississippi was due to the State’s adoption of a new law claims described above in the United States. If enacted the bill making this state a less plaintiff-friendly venue for these would prohibit employees who have been exposed to asbestos claims. Numerous claims were filed in the last few months of from bringing their claims to court. Instead, such employees 2002 before the new law came into effect from January 1, 2003. would receive compensation for their exposure from a trust A significant number of these were only recorded in the first fund. The bill was adopted by the US Senate Judiciary few months of 2003. A total of approximately 29,000 new Committee on July 10, 2003 but at the date when this report claims were filed in Mississippi in 2003, compared with 18,000 was prepared the full Senate had not yet voted on it. However, for 2002. This exceptional surge tailed off towards the end of the Senate Republican Leader has publicly announced that he the first half of 2003. In the second half, total new claims intends to put the bill on the Senate floor for consideration in amounted to approximately 14,000 (including 1,000 in Missis- April 2004. sippi), a substantial reduction compared to the first half of the year (48,000 including 28,000 in Mississippi). As in 2002, the vast majority of these new claims are “mass”actions which can In Brazil, former Group employees suffering from asbestos- involve hundreds or even thousands of plaintiffs making claims related occupational illness are offered either exclusively finan- for damages against dozens of companies operating in cial compensation or medical assistance for their lifetime different economic sectors, without providing evidence of any combined with financial assistance. Only a small number of specific exposure to any product allegedly manufactured by asbestos-related lawsuits were outstanding at December 31, CertainTeed, or of any specific illness or physical disability. Only 2003 and they do not represent a material risk for the compa- a very low proportion of these new lawsuits involve a serious nies concerned. illness, cancer or mesothelioma. Almost all of the claims against CertainTeed are settled out of court. Approximately 54,000 claims were settled in 2003 (compared with 44,000 in 2002). In addition, at least 7,000 outstanding claims were placed on the inactive docket which means that they will not be heard until the plaintiff provides evidence of actual loss or injury.Taking into account the 107,000 outstanding cases at the end of 2002 and the new cases having arisen during 2003, as well as claims settled or placed on the inactive docket, some 108,000 claims were outstanding at December 31, 2003.

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iNote 32 - Related-party transactions Segment information is presented as follows: The main balances and transactions with companies Glass accounted for by the equity method are as follows: •Flat Glass • Insulation & Reinforcements 2003 2002 2001 • Containers (in € millions) High-Performance Materials Assets: • Ceramics & Plastics and Abrasives Financial receivables 1 11 9 Inventories 2 Housing Products Other receivables 16 21 13 • Building Materials Cash and cash equivalents 9 7 15 • Building Materials Distribution • Pipe Provisions for impairment in value (1) (2) (2) Liabilities: The Group has operations in 46 countries. Its principal markets 1 6 5 Short-term debt are in Europe (mainly in France, where its head office is located) Cash advances 5 4 2 and in North America. Management uses several different indi- Expenses: cators to measure the operational performance of each divi- Purchases 10 28 63 sion and to make resource-allocation decisions. These Income: indicators are based on the data used to prepare the consoli- dated financial statements. Sales between divisions are gener- Sales 67 61 64 ally carried out based on the same conditions as sales to external customers and are eliminated in consolidation. The i accounting principles applied by the divisions are the same as Note 33 - Segment and geographic those described in note 1. information In its various businesses, the Saint-Gobain Group is a major worldwide player in the manufacturing and distribution of materials. Its operations break down into three main business sectors made up of divisions.

Segment information by Sector and by Division

(in € millions) GLASS HIGH- HOUSING Other* Total PERFORMANCE PRODUCTS MATERIALS Flat Glass Insulation Containers Ceramics Building Pipe and Rein- & Plastics Building Materials forcements and Abrasives Materials Distribution YEAR ENDED DECEMBER 31, 2003 External sales 4,273 2,925 3,865 3,208 2,623 11,301 1,395 29,590 Internal sales 25 185 4 48 201 4 121 (588) Net sales 4,298 3,110 3,869 3,256 2,824 11,305 1,516 (588) 29,590 Operating income 471 265 442 273 265 560 151 15 2,442 Depreciation and amortization (excluding goodwill) (307) (227) (271) (163) (117) (184) (60) (8) (1,337) Amortization of goodwill 4 (6) (19) (50) (24) (50) (10) 1 (154) Net goodwill 227 283 524 1,319 507 1,796 238 8 4,902 Total assets 4,483 2,870 3,428 3,948 1,717 9,019 1,474 3,156 30,095 Equity method investees 2 11 1 14 Purchases of property, plant and equipment 364 232 265 108 117 213 50 2 1,351 Equity in earnings of equity investees 1 2 2 1 6 * “Other” represents intercompany eliminations in relation to sales, and the holding company activity for the other captions.

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(in € millions) GLASS HIGH- HOUSING Other* Total PERFORMANCE PRODUCTS MATERIALS Flat Glass Insulation Containers Ceramics Building Pipe and Rein- & Plastics Building Materials forcements and Abrasives Materials Distribution YEAR ENDED DECEMBER 31, 2002 External sales 4,406 3,147 4,072 3,592 2,880 10,951 1,226 30,274 Internal sales 17 182 4 45 194 2 118 (562) Net sales 4,423 3,329 4,076 3,637 3,074 10,953 1,344 (562) 30,274 Operating income 495 351 479 244 335 534 135 9 2,582 Depreciation and amortization (excluding goodwill) (328) (240) (293) (189) (131) (183) (61) (9) (1,434) Amortization of goodwill 1 (6) (21) (66) (22) (46) (10) 1 (169) Net goodwill 274 309 642 1,642 736 1,654 257 7 5,521 Total assets 4,658 3,075 3,689 4,632 2,562 8,620 1,396 1,516 30,148 Equity method investees 3 5 8 Purchases of property, plant and equipment 377 198 294 160 135 227 39 1 1,431 Equity in earnings (losses) of equity investees (4) 4 2 2 4 * “Other” represents intercompany eliminations in relation to sales, and the holding company activity for the other captions.

The Pipe Division's distribution operations were transferred to the Building Materials Distribution Division as from January 1, 2002. The segment information by Sector and by Division for 2001 has been adjusted to take into account this transfer on a pro forma basis.

(in € millions) GLASS HIGH- HOUSING Other* Total PERFORMANCE PRODUCTS MATERIALS Flat Glass Insulation Containers Ceramics Building Pipe and Rein- & Plastics Building Materials forcements and Abrasives Materials Distribution YEAR ENDED DECEMBER 31, 2001 External sales 4,452 3,118 4,067 3,970 3,000 10,520 1,263 30,390 Internal sales 26 156 3 48 184 1 134 (552) Net sales 4,478 3,274 4,070 4,018 3,184 10,521 1,397 (552) 30,390 Operating income 551 402 404 392 294 475 146 17 2,681 Depreciation and amortization (excluding goodwill) (320) (243) (298) (195) (137) (185) (68) (6) (1,452) Amortization of goodwill (6) (9) (23) (70) (25) (44) (8) 1 (184) Net goodwill 293 326 780 1,987 782 1,609 282 6 6,065 Total assets 5,133 3,597 4,151 5,501 2,714 8,485 1,510 1,051 32,142 Equity method investees 1 3 6 1 10 21 Purchases of property, plant and equipment 361 229 237 173 134 252 43 1 1,430 Equity in earnings (losses) of equity investees 2 (6) 6 2 1 2 7 * “Other” represents intercompany eliminations in relation to sales, and the holding company activity for the other captions.

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Selected information related to the Group’s operations by geographical area is as follows:

(in € millions) France Other European North Rest Internal Total countries America of the world sales 2003: Net sales 9,926 12,948 5,735 2,227 (1,246) 29,590 Non-current assets 4,224 7,241 4,101 1,671 17,237 2002: Net sales 9,439 13,068 6,785 2,195 (1,213) 30,274 Non-current assets 4,358 7,566 5,130 1,786 18,840 2001: Net sales 9,095 12,944 7,180 2,293 (1,122) 30,390 Non-current assets 4,073 7,461 5,946 2,198 19,678

The geographical breakdown of external sales for 2003, 2002 and 2001 is as follows:

(in € millions) France Other European North Rest Total countries America of the world 2003: External sales 8,473 12,717 5,529 2,871 29,590 2002: External sales 8,083 12,847 6,555 2,789 30,274 2001: External sales 7,741 12,749 7,034 2,866 30,390

iNote 34 - Principal fully consolidated companies The table below shows the principal consolidated companies, particularly those with net sales of over €100 million.

Percentage interest (held directly and indirectly) PRINCIPAL FULLY CONSOLIDATED COMPANIES AT DECEMBER 31, 2003 Holding companies Compagnie de Saint-Gobain France 100.00% Spafi France 100.00% SGPPI France 100.00% Saint-Gobain Corp. United States 100.00% Saint-Gobain Nederland Bv Netherlands 100.00% Partidis France 100.00% Glass Sector FLAT GLASS Saint-Gobain Glass France France 100.00% Saint-Gobain Sekurit France France 100.00% Saint-Gobain Sekurit Deutschland GmbH & CO Kg Germany 99.89% Saint-Gobain Glass Deutschland GmbH Germany 99.89% Saint-Gobain Glass Benelux Belgium 99.73% Koninklijke Saint-Gobain Glass Netherlands 99.73% Cebrace Cristal Plano Ltda Brazil 50.00% Saint-Gobain Cristaleria SA Spain 99.61% Solaglas Ltd United Kingdom 99.97% Saint-Gobain Glass Italia Italy 100.00% Saint-Gobain Sekurit Italia Italy 100.00% Saint-Gobain Vidros Brazil 100.00% Hankuk Sekurit Limited Korea 71.82%

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Percentage interest (held directly and indirectly) INSULATION AND REINFORCEMENTS Saint-Gobain Isover France 100.00% Saint-Gobain Vetrotex France France 100.00% Saint-Gobain Isover G+H AG Germany 99.88% Saint-Gobain Vetrotex Italia SpA Italy 100.00% CertainTeed Corporation United States 100.00% Saint-Gobain Vetrotex America Inc. United States 100.00% Saint-Gobain Ecophon Group Sweden 99.30% CONTAINERS Saint-Gobain Desjonquères France 99.99% Saint-Gobain Emballage France 100.00% Saint-Gobain Oberland AG Germany 96.67% Saint-Gobain Vicasa SA Spain 99.53% Saint-Gobain Containers Inc. United States 100.00% Saint-Gobain Calmar Inc. United States 100.00% Saint-Gobain Vetri SpA Italy 99.98% High-Performance Materials Sector CERAMICS & PLASTICS AND ABRASIVES Saint-Gobain Abrasifs France 99.92% Société Européenne des Produits Réfractaires France 100.00% Saint-Gobain Abrasives Inc. United States 100.00% Saint-Gobain Ceramics & Plastics Inc. United States 100.00% Saint-Gobain Performance Plastics Corp. United States 100.00% Saint-Gobain Abrasivi Italy 99.92% SEPR Italia Itay 100.00% Saint-Gobain Abrasivos Brasil Brazil 100.00% Housing Products Sector BUILDING MATERIALS Saint-Gobain Weber France 99.99% Saint-Gobain Stradal France 100.00% CertainTeed Corporation United States 100.00% Brasilit Brazil 100.00% BUILDING MATERIALS DISTRIBUTION Distribution Sanitaire Chauffage France 100.00% Lapeyre France 100.00% Point.P France 100.00% Raab Karcher GmbH Germany 100.00% Saint-Gobain Building Distribution Ltd United Kingdom 99.97% Saint-Gobain Pipe Systems Plc United Kingdom 99.97% Raab Karcher BV Netherlands 100.00% PIPE Saint-Gobain PAM SA France 100.00% Saint-Gobain Gussrohr KG Germany 100.00% Saint-Gobain Pipelines Plc United Kingdom 99.97% Saint-Gobain Canalizacion SA Spain 99.92% Saint-Gobain Condotte SpA Itay 100.00% Saint-Gobain Canalizaçao SA Brazil 100.00%

PRINCIPAL PROPORTIONALLY CONSOLIDATED COMPANY AT DECEMBER 31, 2003 Glass Sector FLAT GLASS Hankuk Glass Industries Korea 43.80%

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Statutory auditors’ report on the consolidated financial statements

For the year ended December 31, 2003 first time this year, we bring to your attention the following matters: •As stated in Note 1 to the consolidated financial statements, To the shareholders, the Group carries out impairment tests on a regular basis for In compliance with the assignment entrusted to us by your non-current assets. As part of our assessment of the significant Annual General Meeting, we have audited the accompanying estimates used to prepare the financial statements, we exam- consolidated financial statements of Compagnie de Saint- ined the approach used by the Group and – based on the infor- Gobain for the years ended December 31, 2003, 2002 and 2001. mation available at the time of our audit – we also ensured These consolidated financial statements have been approved that the estimates made by the Group at December 31, 2003 by the Board of Directors. Our responsibility is to express an were reasonable. opinion on these financial statements based on our audit. •The Group records provisions for pensions and other post- retirement benefits in accordance with the accounting princi- ples described in Note 1 to the consolidated financial iOpinion on the consolidated statements. Such provisions are calculated based on the assumptions and methods described in Note 16. As part of our financial statements assessments, we ensured that the assumptions and methods We conducted our audit in accordance with the professional used for determining these provisions, as well as the resulting standards applied in France. Those standards require that we valuations, were reasonable. plan and perform the audit to obtain reasonable assurance •The types of provisions for contingencies and charges about whether the consolidated financial statements are free recorded under “Other liabilities”are described in Note 18 to the of material misstatement. An audit includes examining, on a consolidated financial statements. Based on the information test basis, evidence supporting the amounts and disclosures in available at the time of our audit, we ensured that the methods the financial statements. An audit also includes assessing the used to determine provisions for contingencies and charges, as accounting principles used and significant estimates made by well as the disclosures relating to said provisions provided in management, as well as evaluating the overall financial state- the Notes to the consolidated financial statements at ment presentation. We believe that our audit provides a December 31, 2003, were reasonable. reasonable basis for our opinion. These assessments were made in the context of our audit of In our opinion, the consolidated financial statements give a the consolidated financial statements, taken as a whole, and true and fair view of Compagnie de Saint-Gobain and its therefore contributed to the formation of the unqualified subsidiaries' financial position and their assets and liabilities as opinion expressed in the first part of this report. of December 31, 2003, 2002 and 2001 and of the results of their operations for the years then ended in accordance with French accounting principles and regulations. iSpecific verification We have also reviewed the information given in the Group's i management report. We have no comments as to its fair pres- Justification of our assessments entation and its conformity with the consolidated financial In accordance with the requirements of article L. 225-235 of the statements. Commercial Code relating to the justification of our assess- ments, introduced by the Financial Security Act (Loi de Sécurité Financière) of August 1, 2003 and which came into effect for the Paris, March 25, 2004

The Statutory Auditors

PricewaterhouseCoopers Audit SECEF

Pierre Coll Christian Marcellin Jacques Tenette Francis Vallet

This is a free translation into English of the statutory auditors’ report issued in the French language and is provided solely for the convenience of English speaking readers.The statutory auditors’report includes information specifically required by French law in all audit reports, whether qual- ified or not, and this is presented below the opinion on the consolidated financial statements.This information includes an explanatory paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated financial statements. This report, together with the statutory auditors’ report addressing financial and accounting information in the Chairman’s report on internal control should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

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Adoption of International Financial Reporting Standards

By the end of 2002, the Saint-Gobain Group had already begun •A procedures drafting phase, involving the preparation of to prepare for the adoption of International Financial Reporting guidelines by the Doctrine Department, which began in 2003 Standards (IFRS) with effect from January 1, 2005. and is continuing in 2004. A dedicated IFRS project team was set up in January 2003. This team, supported by the Group Doctrine Department, consists Given the size, diverse business mix and geographical reach of of 3 staff working full-time on the project. The Group has also the Saint-Gobain Group, and the continuing uncertainties consulted external advisers, and all phases of the project have surrounding a number of important standards, it is not yet been validated by the Group’s auditors. The project team is possible to give an accurate estimate of the impact of the working in close collaboration with Saint-Gobain’s Divisions, adoption of IFRS on Saint-Gobain’s financial statements. Delegations and operating teams. However, it is clear that the main impact on the financial state- The project has been broken down into 5 phases: ments will come from the first-time application of the stan- •A diagnostic phase, enabling divergences between IFRS and dards on property, plant and equipment, on financial French GAAP to be identified. instruments, and on employee benefits. •A detailed analysis phase, designed to assess how certain standards are to be applied and to identify the organizational In addition, it is not yet possible to make any assessment about changes needed for the implementation of IFRS. These relate future standards relating to business combinations, intangible primarily to the reporting system and modifications to the assets, impairment of assets and stock-based compensation, accounting systems used by Group companies. which are not due to be published until later in 2004. •A training phase, developed jointly with the Delegations. This process began in 2003 with the provision of training for consol- idation teams, financial controllers, consolidation correspon- dents from the Delegations and chief financial officers from across the Group. Efforts have continued during the first quarter of 2004, with over a thousand accounts staff in all countries where the Group operates receiving training. •A systems adaptation phase, covering reporting and accounting software, which began early in 2004 and is ongoing.

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IV• Financial statements of Compagnie de Saint-Gobain (Parent Company)

Compagnie de Saint-Gobain (Parent Company)

iStatements of income

2003 2002 2001 (in € thousands) Income from investments in subsidiaries and affiliates 765,071 932,447 1,173,715 Net income from marketable securities (1) 27,687 9,927 20,139 Interest expense (1) (402,545) (451,048) (597,309) Other financial expense (2,831) (1,959) (1,494) NET FINANCIAL INCOME (note 2) 387,382 489,367 595,051 OTHER OPERATING INCOME (EXPENSE) 5,549 (20) 7,456 INCOME BEFORE TAX AND EXCEPTIONAL ITEMS 392,931 489,347 602,507 EXCEPTIONAL ITEMS (note 3) 50,755 76,173 475,345 INCOME TAX (note 4) 69,888 30,396 15,020 NET INCOME 513,574 595,916 1,092,872

iAnalysis of the statements of income

1 - Income from investments in subsidiaries and affiliates

2003 2002 2001 (in € thousands) Income from investments 415,750 500,867 587,988 Income from related receivables and loans 349,321 431,580 585,727 TOTAL 765,071 932,447 1,173,715

2 - Net income from marketable securities

2003 2002 2001 (in € thousands) Interest income (1) 15,602 9,350 18,615 Net income from sales of marketable securities 12,085 577 1,524 TOTAL 27,687 9,927 20,139

3 - Interest expense

2003 2002 2001 (in € thousands) Non-voting participating securities (23,973) (26,272) (27,432) Other interest expense (1) (378,572) (424,776) (569,877) TOTAL (402,545) (451,048) (597,309)

(1) To present financial income and expense more clearly, financial income from off-balance sheet instruments is deducted from expenses on the hedged item. This presentation method had the effect of reducing expenses by €120,396 thousand in 2003, €122,335 thousand in 2002 and €147,863 thousand in 2001.

146 SAINT-GOBAIN • 2003 FINANCIAL STATEMENTS SAINT-GOBAIN RA 2003 Soc GB 19/05/04 7:47 Page 147

y)

4 - Other financial income (expense)

2003 2002 2001 (in € thousands) Income from non-current assets 85 68 143 Amortization and provisions (3,067) (2,149) (1,786) Exchange gains, net 151 122 149 TOTAL (2,831) (1,959) (1,494)

5 - Other operating income (expense)

2003 2002 2001 (in € thousands) Other operating income: •Group (consolidated companies) 157,573 152,258 144,634 •Outside the Group 7,396 5,342 5,309 TOTAL 164,969 157,600 149,943 Other operating expense: •Personnel expenses (49,478) (49,185) (48,129) •Other (110,312) (108,447) (94 495) TOTAL (159,790) (157,632) (142,624) Share in profits of joint ventures 370 12 137 NET 5,549 (20) 7,456

6 - Exceptional items

2003 2002 2001 (in € thousands) Exceptional income: •From revenue transactions 14,232 24,145 6,713 •From capital transactions 128,619 364,082 3,063,714 •Reversals of provisions 49,921 105,464 15,413 TOTAL 192,772 493,691 3,085,840 Exceptional expenses: •On revenue transactions (1,406) (10,004) (7,173) •On capital transactions (113,218) (364,340) (2,557,668) •Depreciation, amortization and provisions (27,393) (43,174) (45,654) TOTAL (142,017) (417,518) (2,610,495) NET EXCEPTIONAL INCOME 50,755 76,173 475,345

(1) To present financial income and expense more clearly, financial income from off-balance sheet instruments is deducted from expenses on the hedged item. This presentation method had the effect of reducing expenses by €120,396 thousand in 2003, €122,335 thousand in 2002 and €147,863 thousand in 2001.

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Balance sheets at December 31

ASSETSIF 2003 2002 2001 (in € thousands) Gross Depreciation Net amortization and provisions NON-CURRENT ASSETS Intangible assets (note 5): •Goodwill (1) 567 (454) 113 136 159 •Other intangible assets 33,432 (26,223) 7,209 11,887 15,611 •In progress 4,153 4,153 961 792 Property and equipment (note 6): •Land 620 620 620 620 •Buildings 487 (245) 242 252 262 •Other 11,389 (8,479) 2,910 2,711 3,025 •In progress 0 04 Financial investments (2) (note 7): •Investments in subsidiaries and affiliates 7,792,475 (1,217) 7 791,258 7,890,199 7,805,066 •Investment-related receivables 4,790,181 4 790,181 5,539,962 6,381,207 •Other investment securities 441,410 (36,663) 404,747 147,684 179,667 •Loans 1,649,507 1,649,507 1,542,190 892,510 •Other financial investments 1,103 1,103 1,080 1,166 TOTAL I 14,725,324 (73,281) 14,652,043 15,137,682 15,280,089 CURRENT ASSETS (note 8) Other receivables (3) 108,764 108,764 96,702 49,376 Marketable securities 1,214,718 1,214,718 76,943 2,040 Cash and cash equivalents 1,681,339 1,681,339 1,303,929 2,006,256 Accruals: •Prepayments (3) 2,407 2,407 3,306 8,059 TOTAL II 3,007,228 – 3,007,228 1,480,880 2,065,731 Deferred charges TOTAL III 7 957 7,957 10,564 2,235 TRANSLATION ADJUSTMENTS - ASSETS - TOTAL IV – – – – – TOTAL 17,740,509 (73,281) 17,667,228 16,629,126 17,348,055 (1) Including leasehold rights – –– (2) Of which due within one year 3,295,454 3,891,338 3,482,724 (3) Of which due in over one year 771 942 1,112

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LIABILITIES AND SHAREHOLDERS’ EQUITY 2003 2002 2001 (in € thousands) Shareholders’ equity (note 9): •Capital stock 1,391,300 1,364,043 1,364,138 •Additional paid-in capital 2,241,803 2,128,276 2,113,148 •Reserve for revaluation of assets 56,262 56,516 56,213 •Reserves: - Legal reserve (a) 139,130 136,404 136,414 -Untaxed reserves 2,541,092 2,548,798 2,273,498 -Other reserves 106,415 106,415 106,415 •Unappropriated retained earnings 1,090,363 865,882 426,674 •Net income for the year 513,574 595,916 1,092,872 •Untaxed provisions (note 11) 6,615 6,807 6,625 TOTAL I 8,086,554 7,809,057 7,575,997 Other equity (note 10): •Non-voting participating securities - TOTAL I A 391,034 391,034 391,034 Provisions for contingencies and charges (note 11): •Provisions for contingencies 357,031 343,215 446,214 •Provisions for charges 10,474 10,020 9,588 TOTAL II 367,505 353,235 455,802 Debt and payables (1) (note 12) : •Other bonds 1,231,873 1,255,867 309,099 •Bank borrowings (2) 612,411 716,522 760,266 •Other short- and long-term debts 6,947,306 6,007,077 7,544,234 •Taxes and social charges payable 12,206 11,864 37,582 •Other payables 18,339 84,470 274,041 Accruals (1): •Deferred income TOTAL III 8,822,135 8,075,800 8,925,222 TRANSLATION ADJUSTMENTS - LIABILITIES - TOTAL IV – ––

TOTAL 17,667,228 16,629,126 17,348,055 (a) Of which reserve for long-term capital gains 14,225 14,225 14,225 (1) Due in over one year 6,157,132 6,054,189 4,918,454 Due within one year 2,665,003 2,021,611 4,006,768 (2) Of which short-term bank loans and overdrafts 280,397 234,419 282,363

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Statements of cash flows

2003 2002 2001 (in € thousands) NET INCOME 513,574 595,916 1,092,872 Depreciation and amortization 9,738 8,682 6,934 Changes in provisions (22,380) (61,658) 30,242 Profit on sales of non-current assets, net (15,401) 257 (506,046) CASH FLOWS FROM OPERATIONS 485,531 543,197 624,002 (Increase) decrease in other receivables (11,622) (53,051) 118,955 Increase (decrease) in taxes and social charges payable 342 (25,718) (81,199) Increase (decrease) in other payables (66,131) (189,571) 80,289 NET CHANGE IN WORKING CAPITAL (77,411) (268,340) 118,045 CASH FLOWS FROM OPERATING ACTIVITIES 408,120 274,857 742,047 Acquisitions of intangible assets (4,147) (1,923) (3,642) Purchases of property and equipment (1,210) (750) (868) Disposals of property and equipment and intangible assets 19 79 38 Acquisition of investments in subsidiaries and affiliates and other investment securities 3,059 (444,389) (3,014,621) Purchases of treasury stock (238,190) (162,051) (252,924) Disposals of investments in subsidiaries and affiliates and other investment securities 128,600 364,003 3 063,676 (Increase) decrease in investment-related receivables 749,781 841,245 (82,552) (Increase) decrease in long-term loans (107,316) (649,680) (121,467) (Increase) decrease in other financial investments (23) 86 (104) CASH FLOWS FROM INVESTING ACTIVITIES/DIVESTMENTS 530,573 (53,380) (412,464) Issues of capital stock 143,509 163,596 129,086 Dividends paid (379,141) (378,364) (356,860) Increase (decrease) in unappropriated retained earnings – –– Increase (decrease) in reserves for revaluation of assets – –– Increase (decrease) in other equity – –– Increase (decrease) in short- and long-term debt 356,015 586,068 (468,797) Increase (decrease) in bank overdrafts and other short-term debt 456,109 (1,220,201) (384,442) Decrease (increase) in marketable securities (1,137,775) (74,903) 71,021 CASH FLOWS FROM FINANCING ACTIVITIES (561,283) (923,804) (1,009,992) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 377,410 (702,327) (680,409) Cash and cash equivalents at beginning of year 1,303,929 2,006,256 2,686,665 Cash and cash equivalents at end of year 1,681,339 1,303,929 2,006,256

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Notes to the parent company or the exercise price of options granted to employees when the financial statements shares have been allocated for attribution under stock options plans and when the exercise of the options is probable. The financial statements cover the twelve-month period from January 1 to December 31, 2003. The following notes form an integral part of the annual financial Marketable securities statements. Marketable securities mainly include units in SICAV and other These financial statements were approved by the Board of Direc- mutual funds recorded at the lower of cost and market. tors on March 25, 2004.

Receivables i Note 1: Accounting principles and methods Receivables are carried at their nominal value. A provision for The financial statements of Compagnie de Saint-Gobain have impairment in value is recorded when their fair value falls below been drawn up in accordance with French generally accepted net book value. accounting principles. The presentation of the statement of income has been adapted Foreign currency transactions to the activity of Compagnie de Saint-Gobain which is a holding company. Transactions in foreign currencies are recorded at the exchange The principle of consistent application of accounting principles rate prevailing on the transaction date. Receivables and payables from the previous year has been complied with. which are specifically hedged are recorded in the balance sheet at The financial statements of the German branch are included in the hedging rate. Other receivables, payables and bank balances those of Compagnie de Saint-Gobain’s head office. in foreign currencies, as well as the instruments used to hedge them, are converted at the year-end rate and the related exchange differences are recorded in the balance sheet under Intangible assets “Translation adjustments”. Provisions are booked for exceptional Assigned goodwill not covered by any form of legal protection is unrealized exchange losses which are not hedged. amortized over twenty-five years. Other intangible assets are amortized over periods of between three and five years. Financial instruments Compagnie de Saint-Gobain manages, mainly on behalf of its Property and equipment subsidiaries, the hedging of foreign exchange and interest rate Property and equipment are stated at cost (purchase price plus risks resulting from the Group’s international activities. related costs, excluding expenses incurred on acquisition), except Liquidity risk, which is also managed by Compagnie de Saint- for assets acquired prior to December 31, 1976, which have been Gobain, is not material. revalued. Market risks exclusively concern investments held for strategic Depreciation is based on the estimated useful life of assets using purposes. the straight-line or reducing-balance method. The most In order to anticipate future developments in the accounting commonly used useful lives are as follows: treatment of financial instruments, the Company amended its •Buildings 40 years Straight-line accounting policies in 2001 in order to take into account fair •Improvements value. and additions 12 years Straight-line The presentation of the financial statements for the year ended •Installations and fittings 5 or 12 years Straight-line December 31, 2003 is unchanged from prior years. •Office furniture 10 years Straight-line The main financial instruments used to hedge foreign exchange •Office equipment 5 years Straight-line risks are forward purchase and sale contracts and options. •Vehicles 4 yearsStraight-line Hedged receivables and payables are recorded in the balance •Computer equipment 3 years Straight-line sheet at the hedging rate. or reducing balance The portion representing the extrinsic (time) value of unrealized gains or losses on currency options used to hedge the above posi- tions is taken to income, and the portion representing intrinsic Financial investments, investments value is recorded in the balance sheet. Unrealized losses on in subsidiaries and affiliates and options which are not classified as hedges are recognized in the income statement, whereas unrealized gains are not taken into other investment securities account. The gross value of these items represents cost excluding Compagnie de Saint-Gobain uses interest-rate swaps and swap- expenses. tions (caps and floors) as well as forward rate agreements to The book value of investments in holding companies is assessed hedge its exposure to increases in interest rates. based on revalued net assets. Provisions for impairment in value Income and expenses related to interest-rate swaps are recog- are generally recorded or written back based on the average of nized on a symmetrical basis with the expenses and income on the values obtained between revalued net assets of the company the hedged items. concerned and capitalized average net cash flows. Increases and The portion representing the extrinsic (time) value of unrealized write-backs of provisions against investment securities are gains or losses on interest rate options used to hedge the above included in exceptional items. positions is taken to income and the portion representing Own shares held by Compagnie de Saint-Gobain for different intrinsic value is recorded in the balance sheet. Interest-rate purposes are classified as “Other investment securities” in the options which are not classified as hedges are recognized in the balance sheet. They are carried at the lower of cost, market price income statement at market value.

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Consolidated tax agreements iNote 3: Exceptional items Compagnie de Saint-Gobain is assessed for income tax on its Exceptional income mainly corresponds to income from revenue consolidated fiscal income as provided for under article 209 quin- transactions in an amount of €14 million, proceeds from asset quies of the French Tax Code (CGI) as well as the integrated tax disposals or contributions of €129 million, and write-backs of (Intégration Fiscale) system as provided for under article 223 A et provisions for contingencies and charges and impairment in seq. of the CGI. A request has been filed to renew the tax consoli- value of €50 million. dation agreement, which covered the years 2001 to 2003, for the Exceptional expenses mainly correspond to expenses on revenue years 2004 to 2006. transactions of €2 million (including €1.3 million paid to The tax charge of Compagnie de Saint-Gobain includes its own employees under incentive schemes), assets sold or contributed tax liability as well as that resulting from the consolidated fiscal representing a net book value of €113 million, and amortization, income of its tax group. depreciation and provision charges of €27 million, including €11 A provision for potential tax liabilities is booked for the income million relating to the provision for potential tax liabilities. tax benefit to be transferred by Compagnie de Saint-Gobain to loss-making subsidiaries in the tax group when the subsidiaries concerned return to profit. Movements in this provision are iNote 4: Income tax recorded under exceptional items. Under the consolidated tax regime and the integrated tax systems, the income tax benefit attributable to Compagnie de iNote 2: Net financial income Saint-Gobain is estimated at €70 million for the year ended December 31, 2003, as follows: Net financial income decreased by €102 million, due to the •€43 million tax benefit for 2003; combined impact of: •€27 million tax benefit due to an adjustment to the provision •a €167 million reduction in income from investments in booked at December 31, 2002 for the fiscal year 2002. subsidiaries and affiliates; Compagnie de Saint-Gobain is required to credit to a special •a €66 million decrease in interest expense, net of interest long-term capital gains reserve, income taxed at the reduced rate income; of 19% recorded by the companies included in the integrated tax •a €1 million increase in the amortization charge and additions system. An amount of €292 million will be added to the reserve to provisions. in 2004, in respect of 2003 income.

iNote 5: Intangible assets Intangible assets represent goodwill and other intangible assets which are amortized over periods of between three and five years.

Immobilisations Non-current assets Amortization (in € thousands) Gross at Gross Accumulated Accumulated beginning at end at beginning at end of year Increase Decrease of year of year Increase Decrease of year Goodwill 567 567 431 23 454 Other intangible assets 33,075 955 (598) 33,432 21,188 5,633 (598) 26,223 In progress 961 3,192 4,153 – – TOTAL 34,603 4,147 (598) 38,152 21,619 5,656 (598) 26,677

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iNote 6: Property and equipment

Immobilisations Non-current assets Amortization (in € thousands) Gross at Gross Accumulated Accumulated beginning at end at beginning at end of year Increase Decrease of year of year Increase Decrease of year Land 620 620 –– Buildings 487 487 235 10 245 Other 10,338 1,210 (159) 11,389 7,627 1,005 (153) 8,479 In progress – – – – TOTAL 11,445 1,210 (159) 12,496 7,862 1,015 (153) 8,724

iNote 7: Financial investments

Financial investments

mobilisations Non-current assets (in € thousands Gross Gross at beginning at end of year Increase Decrease of year Investments in subsidiaries and affiliates 7,895,809 71 (103,405) 7,792,475 Investment-related receivables 5,539,962 1,943,679 (2,693,460) 4,790,181 Other investment securities 216,158 238,320 (13,068) 441,410 Loans 1,542,190 1,654,688 (1,547,371) 1,649,507 Other financial investments 1,080 145 (122) 1,103 TOTAL 15,195,199 3,836,903 (4,357,426) 14,674,676

Changes in investments in subsidiaries and affiliates

(in € thousands) Increase Decrease Purchase of various shares from German branch 71 Disposal of Vivendi Universal shares (95,496) SEPR capital reduction (3,261) Disposal of Iranit shares (4,648) TOTAL 71 (103,405)

Changes in other investment securities

(in € thousands) Increase Decrease Purchase of treasury stock on the market 238,190 Purchase of Vigeo SAS shares 130 Sales of treasury stock (13,068) Other sales of shares – TOTAL 238,320 (13,068)

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Other financial investments

Maturity (in € thousands) Gross Within one year Over one year Investment-related receivables 4,790,181 1,648,765 3,141,416 Loans (1) 1,649,506 1,646,689 2,817 Other 1,103 – 1,103 TOTAL 6,440,790 3,295,454 3,145,336

(1) Loans granted during the year 1,654,687 Loans repaid during the year 1,547,371

Changes in treasury stock

(in € thousands) Number of shares held Gross Net At December 31, 2000 2,970,132 111,993 99,881 Purchases from International Saint-Gobain 5,017,752 215,387 215,387 Acquisitions in 2001 968,192 37,537 37,537 Disposals in 2001 (219,472) (9,332) (6,311) Cancellations in 2001 (3,918,252) (148,756) (148,756) Adjustments to provision for impairment in value ––(18,557) At December 31, 2001 4,818,352 206,829 179,181 Acquisitions in 2002 5,403,148 162,051 162,051 Disposals in 2002 (107,976) (4,635) (3,136) Cancellations in 2002 (4,953,708) (148,572) (148,572) Adjustments to provision for impairment in value ––(42,326) At December 31, 2002 5,159,816 215,673 147,198 Acquisitions in 2003 6,784,000 238,190 238,190 Disposals in 2003 (304,430) (13,068) (8,843) Cancellations in 2003 –– – Adjustments to provision for impairment in value ––27,586 AT DECEMBER 31, 2003 11,639,386 440,795 404,131

Further to the four-for-one stock split of June 27, 2002, the number of shares at December 31, 2001 has been multiplied by four in order to permit year-on-year comparisons. No treasury shares were cancelled in 2003. However, the Board of Directors of Compagnie de Saint-Gobain decided to cancel 6,799,832 shares on January 29, 2004.

iNote 8: Current assets Current assets rose €1,524 million in 2003 to €3,007 million. This change reflects the combined impact of a €1,138 million increase in marketable securities, a €377 million increase in cash and cash equivalents, a €12 million rise in other receivables and a €1 million decrease in prepayments.

Maturity of receivables

Maturity (in € thousands) Gross Within one year Over one year Other receivables 108,764 108,764 – Prepayments 2,407 1,636 771 TOTAL 111,171 110,400 771

154 SAINT-GOBAIN • 2003 FINANCIAL STATEMENTS SAINT-GOBAIN RA 2003 Soc GB 19/05/04 7:47 Page 155

iNote 9: Shareholders’ equity

Changes in shareholders’ equity

(in € thousands) Amounts Shareholders’ equity before appropriation of net income for 2002 7,809,057 Distribution in 2003 of the dividend relating to 2002 (379,141) Employee share issue (capital and premiums) 143,510 Other movements – revaluation reserve and untaxed provisions (446) Net income for 2003 513,574 SHAREHOLDERS’ EQUITY BEFORE APPROPRIATION OF NET INCOME FOR 2003 8,086,554

Movements in capital stock

Number of shares Amounts (in € thousands) Capital stock at beginning of year (1) 341,010,680 1,364,043 Shares issued under the Group Savings Plan 6,499,407 25,998 Shares issued on exercise of stock options granted in 1995 and 1996 314,880 1,259 Cancellation of shares –– CAPITAL STOCK AT YEAR-END (2) 347,824,967 1,391,300

(1) Par value of shares at January 1, 2003: €4. (2) Par value of shares at December 31, 2003: €4. Share issue premiums increased by €114 million as a result of the share issues mentioned above, after taking into account related expenses and the adjustment to the legal reserve, which increased by €3 million. The reserve for the revaluation of assets remained unchanged at €56 million. Following the adoption of the resolutions at the Ordinary and Extraordinary General Meeting of June 5, 2003 relating to the appro- priation of 2002 net income and the adjustment of the dividend paid for that year, retained earnings rose by €224 million. The long- term capital gains reserve decreased by €8 million, representing the combined impact of a €42 million write-back to adjust the provisional charge concerning 2001 income, and the provisional charge concerning 2002 income amounting to €34 million. Lastly, 2003 net income contracted by €82 million compared with 2002.

Stock option plans Compagnie de Saint-Gobain has stock option plans available to certain employees, and a Group Savings Plan (“PEG”), or employee stock purchase plan. The stock option plans allow the Board of Directors to grant options which allow the holder to obtain Saint-Gobain shares at a price based on the average share price for the 20 trading days preceding the date of grant. Discounts of 10% and 5% on this average price were granted in 1997 and 1998 respectively. Such discounts were discontinued in 1999. Options vest over a period of two, three, four or five years with full vesting occurring at the end of the vesting period. Options must be exercised within eight or ten years from the date of grant and all rights to options are forfeited if the employee terminates employ- ment with the Group. Since 1997, these plans no longer involve subscription options on new shares but purchase options on existing shares held in treasury stock for this purpose. Further to the four-for-one stock split of June 27, 2002, the number of options at December 31, 2001 has been multiplied by four in order to permit meaningful year-on-year comparisons.

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Data relating to stock options outstanding in 2001, 2002 and 2003 are listed below:

Shares (€4 par value) Average exercise price (in euros) Options outstanding at January 1, 2001 8,298,424 32.81 Options granted 3,774,800 40.22 Options exercised (701,592) 22.25 Options forfeited (83,092) 36.63 Options outstanding at December 31, 2001 11,288,540 35.92 Options granted 3,785,500 23.53 Options exercised (334,456) 23.15 Options forfeited (164,520) 39.87 Options outstanding at December 31, 2002 14,575,064 32.95 Options granted 3,717,700 35.67 Options exercised (619,310) 24.14 Options forfeited (80,000) 23.53 OPTIONS OUTSTANDING AT DECEMBER 31, 2003 17,593,454 33.88

At December 31, 2001, 2002 and 2003, 2,130,560, 3,413,064 and 5,114,854 options were exercisable at exercise prices ranging from €25.43 to €34.18. At December 31, 2003, 6,512,620 options were available for grant under the authorization given by the General Meeting of June 5, 2003. The following table summarizes information about stock options outstanding at December 31, 2003:

Options exercisable Options not exercisable Total options Type of outstanding options Weighted average Exercise Number of remaining Exercise Number of Number of price options contractual life price options options Date of grant (in euros) (in months) (in euros) 1996 21.42 355,700 11 355,700 Subscription 1997 28.47 773,874 23 773,874 Purchase 1998 29.54 1,038,880 35 1,038,880 Purchase 1999 40.63 1,167,700 71 40.63 503,200 1,670,900 Purchase 2000 37.69 1,778,700 83 37.69 859,000 2,637,700 Purchase 2001 40.22 0 95 40.22 3,694,800 3,694,800 Purchase 2002 23.53 0 107 23.53 3,703,900 3,703,900 Purchase 2003 35.67 0 119 35.67 3,717,700 3,717,700 Subscription TOTAL – 5,114,854 ––12,478,600 17,593,454 –

Group savings plan (PEG) of Compagnie de Saint-Gobain The PEG employee stock purchase plan is open to all Group employees in France and in most other European countries who have completed a minimum of three months’ service with the Group. The plan offers shares to eligible employees at a 20% discount from the average price quoted for the shares for the 20 trading days preceding the date of the meeting of the Board of Directors at which the Plan is set. Employees can invest for a five or ten-year term. Over this period, employees may not sell their shares, barring exceptional circum- stances. Under the PEG, the Group issued 6,499,407, 4,703,396 and 3,612,600 shares with a par value of €4 to employees in 2003, 2002, and 2001, respectively, at an average price per share of €21.14 in 2003, €33.88 in 2002 and €33.25 in 2001.

iNote 10: Other equity Other equity (€391 million) corresponds to non-voting participating securities in French francs and ecus issued between 1983 and 1988, which were converted into euros in 1999.

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iNote 11: Provisions

Provisions

(in € thousands)

Reversals Reversals Opening from provisions from surplus balance Additions utilized provisions Other At year-end Untaxed provisions: • Reinvested capital gains 6,427 6,427 •Other 380 28 (219) (1) 188 6,807 28 (219) (1) 0 6,615 Provisions for contingencies: •For potential tax liabilities (1) 342,200 10,920 (120) 353,000 •For exchange losses 0 0 •Other 1,015 2,869 147 4,031 343,215 13,789 (120) 0 147 357,031 Provisions for charges: •Other 10,020 454 10,474 10,020 454 0 0 0 10,474 Provisions for impairment in value: •Financial investments 74,084 13,122 (8,872) (40,708) 254 37,880 •Marketable securities 0 0 74,084 13,122 (8,872) (40,708) 254 37,880

TOTAL 27,393 (9,211) (40,709)

(1) In connection with the integrated tax system and consolidated tax regime, €11 million was added to the provision for potential tax liabilities to reflect an adjustment in the level of risk of subsidiaries returning to profit.

iNote 12: Debt and payables Total debt and payables increased by €746 million to €8,822 million in 2003, mainly reflecting an increase in debt (€812 million), stable taxes and social charges payable and a reduction in other payables (€66 million).

Maturities of debt and payables

Maturity (in € thousands) Gross Within one year Over one year Bonds (1) 1,231,873 279,353 952,520 Bank borrowings (1) (2) 612,411 299,964 312,447 Other short- and long-term debt (1) (3) 6,947,306 2,055,141 4,892,165 Taxes and social charges payable 12,206 12,206 – Other payables (3) 18,339 18,339 – Deferred income TOTAL DEBT AND PAYABLES (4) 8,822,135 2,665,003 6,157,132

(1) Issued during the year 1,805,852 Repaid during the year 993,728 (2) Of which: - two years or less at inception 287,372 - over two years at inception 325,039 (3) Of which due to partners NONE (4) Of which debt due in over 5 years 2,002,051

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Long-term and short-term debt

2003 2002 2001 (in € thousands) LONG-TERM AND SHORT-TERM DEBT Long-term portion of long-term debt Due between January 1 and December 31: 2003 – – 279,789 2004 294,960 546,053 381,498 2005 1,259,521 1,277,132 1,318,486 2006 488,360 699,813 776,394 2007 1,575,755 1,664,243 279,469 2008 828,648 846,206 – 2009 977,259 –– Due between 6 and 10 years 990,410 986,250 1,848,185 Due beyond 10 years – –– Unspecified 34,382 34,493 34,634 Total long-term portion of long-term debt 6,449,295 6 054,190 4,918,455 Short-term portion of long-term debt 186,368 225,781 847,633 TOTAL LONG-TERM DEBT (INCLUDING SHORT-TERM PORTION) 6,635,663 6,279,971 5,766,088 Other short-term debt Treasury notes (in euros) 152,500 235,500 971,000 Treasury notes (in US dollars) 142,518 76,285 – Euro Commercial Paper (in euros) 190,000 201,300 – Euro Commercial Paper (in pounds sterling) – – 172,555 Euro Commercial Paper (in US dollars) – 123,009 347,782 US Commercial Paper (in US dollars) – –– Borrowings from Group entities 1,374,045 810,563 1,053,198 Bank overdrafts and other short-term borrowings 280,397 234,419 282,363 Other 16,467 18,419 20,613 TOTAL OTHER SHORT-TERM DEBT 2,155,927 1,699,495 2,847,511 TOTAL LONG- AND SHORT-TERM DEBT 8,791,590 7,979,466 8,613,599

Long-term and short-term debt can be analyzed as follows by currency:

2003 2002 2001 (in € thousands) Euro 4,473,899 3,829,414 2,997,675 US dollars 946,960 1,160,482 1,472,092 Swiss francs 255,063 282,177 276,373 Pounds sterling 879,321 954,094 1,019,948 Czech koruna 75,035 47,576 – Norwegian krone 5,385 6,228 – TOTAL 6,635,663 6,279,971 5,766,088

On February 18, 2002, Compagnie de Saint-Gobain issued 4,380,953 “OCEANE”bonds that are convertible into new shares or exchange- able for existing shares.These bonds have a nominal value of €210 each, and the total issue came to €920 million.The annual interest rate for these “OCEANE” bonds is 2.625% payable in arrears on January 1 each year. The bonds will be redeemed in full on January 1, 2007 in cash at nominal value, i.e. €210 per bond, or they may be repurchased before maturity by Compagnie de Saint-Gobain on the market or in connection with a public buyback offer.The Company may also decide to carry out an early redemption of all outstanding “OCEANE” bonds, subject to certain conditions, which include share price thresholds. Each “OCEANE”bond may be converted or exchanged for four Compagnie de Saint-Gobain shares.This ratio may, however, be adjusted if the Company carries out certain financial operations. No “OCEANE” bonds were converted or exchanged during 2003. Therefore, if all of the bonds were converted at the rate initially provided for, the holders would receive a total of 17,523,812 shares, repre- senting 5% of the Company’s capital at December 31, 2003.

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iNote 13: Information concerning related companies and investments

Net amount concerning (in € thousands) Companies in Related which Compagnie Net amount companies de Saint-Gobain has in the a direct holding Other balance sheet Investments in subsidiaries and affiliates 7,711,728 79,530 7,791,258 Investment-related receivables 4,787,927 2,254 4,790,181 Other investment securities 404,131 616 404,747 Loans 495,158 217,216 937,133 1,649,507 Other receivables 21,806 32 86,926 108,764 Marketable securities 1,214,718 1,214,718 Cash and cash equivalents 1,519,782 71,383 90,174 1,681,339 Bonds 1,231,873 1,231,873 Bank borrowings 612,411 612,411 Other borrowings 6,051,094 244,193 652,019 6,947,306 Other payables 9,123 9,216 18,339

iNote 14: Investment portfolio

(in € thousands) Country Net book value % interest Number of shares Spafi France 2,726,540 100.00 116,289,805 Partidis France 2,065,919 100.00 78,262,892 Saint-Gobain Matériaux de Construction France 738,712 100.00 21,325,936 Vertec France 491,039 100.00 8,008,999 Compagnie de Saint-Gobain (treasury stock) France 404,131 3.35 11,639,386 Saint-Gobain Cristaleria Spain 211,220 23.91 3,659,866 Raab Karcher GmbH Germany 194,609 100.00 100,000,000 Saint-Gobain Glass Benelux SA Belgium 160,880 88.69 1,667,698 Saint-Gobain Isover G+H AG Germany 153,670 99.88 3,196,301 Saint-Gobain Vetrotex Deutschland GmbH Germany 153,669 100.00 45,000,000 International Saint-Gobain Switzerland 153,409 96.50 221,950 Saint-Gobain Vidros SA Brazil 118,068 54.46 115,072,390 São Lourenço Brazil 109,559 99.91 3,617,581 Saint-Gobain Glass Deutschland GmbH Germany 86,660 60.00 119,999,970 Saint-Gobain Autoglas GmbH Germany 72,833 60.00 120,000,000 Vivendi Universal France 72,508 0.50 5,314,927 Saint-Gobain Emballage France 61,553 20.52 331,964 Saint-Gobain Schleifmittel-Beteiligungen GmbH Germany 61,151 100.00 20,000,000 SEPR France 53,310 25.73 407,600 Société Financière des Miroirs France 45,735 100.00 2,999,994 Saint-Gobain PAM France 30,732 8.10 360,255 Saint-Gobain Nederland Netherlands 13,621 100.00 66,100 Valfix Finanz AG Switzerland 8,838 100.00 11,400

Various real-estate companies 3,428

Various French companies 978

Various non-French companies 3,233 8,196,005 Analysis: Investments in subsidiaries and affiliates 7,791,258 Other investment securities 404,747 8,196,005

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iNote 15: : Stock market value of investments held in French companies

(in € thousands) Stock market price at December 31, 2003 Vivendi Universal 102,419

iNote 16: Information on direct holdings of the parent company where book value exceeds 1% of capital

(In thousands Book value Loans and Dividends of euros or other currency) of capital held advances Guarantees received granted given 2003 netby the Capital % by the by the 2003 income/ Company stock Reserves interest Gross Net Company Company sales (loss) in 2003 1 - SUBSIDIARIES 50 % of the capital held by Compagnie de Saint-Gobain Spafi 18, avenue d’Alsace EUR EUR EUR F-92400 Courbevoie 1,860,637 1,418,723 100.00 2,726,540 2,726,540 – 82,347 69,774 Partidis 18, avenue d’Alsace EUR EUR EUR EUR F-92400 Courbevoie 1,193,509 (17,772) 100.00 2,065,919 2,065,919 1,224,375 4,859 383,290 – Saint-Gobain Matériaux de Construction 18, avenue d’Alsace EUR EUR EUR EUR F-92400 Courbevoie 325,221 6,851 100.00 738,712 738,712 1,070 7,100 272,771 69,096 Vertec 18, avenue d’Alsace EUR EUR EUR F-92400 Courbevoie 128,144 371,513 100,00 491,039 491,039 – 165,658 176,198 Raab Karcher Baustoffe GmbH Hanauer Landstrasse, 150 D-60314 Frankfurt am EUR EUR EUR EUR Main 100,000 94,600 100.00 194,609 194,609 87,266 1,435,120 (50,447) – Saint-Gobain Glass Benelux SA Rue des Glaces Nationales, 169 EUR EUR EUR EUR B-5060 Sambreville 70,900 89,336 88.69 160,880 160,880 153,40 15,800 7,738 Saint-Gobain Isover G+H AG Bürgermeister-Grünzweig 1 Strasse EUR EUR EUR EUR D-67059 Ludwigshafen 82,000 11,291 99.88 153,670 153,670 326,841 28,514 – Saint-Gobain Vetrotex Deutschland GmbH Bicheroux Strasse 61 EUR EUR EUR EUR D-52134 Herzogenrath 23,008 132,936 100.00 153,669 153,669 66,266 12,636 – International Saint-Gobain 10, rue Saint-Pierre CHF CHF CHF CH-1700 Fribourg 230,000 116,822 96.50 153,409 153,409 – 96,504 53,341 Saint-Gobain Vidros SA 482,avenida Santa Marina Agua Branca 05036-903 São Paulo-SP BRL BRL BRL BRL (Brazil) 420,000 306,720 54.46 118,068 118,068 919,322 127,900 8,354

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(In thousands Book value Loans and Dividends of euros or other currency) of capital held advances Guarantees received granted given 2003 netby the Capital % by the by the 2003 income/ Company stock Reserves interest Gross Net Company Company sales (loss) in 2003 São Lourenço Administradora 482, avenida Santa Marina Agua Branca 05036-903 São Paulo-SP BRL BRL BRL (Brazil) 175,654 154,497 99.91 109,559 109,559 – 57,936 7,148 Saint-Gobain Glass Deutschland GmbH Viktoria - Allee 3-5 EUR EUR EUR EUR D-52066 Aachen 102,258 82,899 60.00 86,660 86,660 332,339 8,414 – Saint-Gobain Autoglas GmbH Viktoria - Allee 3-5 EUR EUR EUR D-52066 Aachen 102,258 19,130 60.00 72,833 72,833 – 2,655 – Saint-Gobain Schleifmittel- Beteiligungen GmbH Viktoria - Allee 3-5 EUR EUR EUR D-52066 Aachen 10,226 50,925 100.00 61,151 61,151 – (7,059) – Société Financière des Miroirs 18, avenue d’Alsace EUR EUR EUR EUR F-92400 Courbevoie 45,750 1,450 100.00 45,735 45,735 – 700 900

2 - INVESTMENTS 10 to 50% of the capital held by Compagnie de Saint-Gobain Saint-Gobain Cristaleria Edificio Ederra Centro Azca Paseo de la Castellana 77 EUR EUR EUR EUR 28046 Madrid 91,988 420,414 23.91 211,220 211,220 175,745 471,887 78,444 11,309 Saint-Gobain Emballage 18, avenue d’Alsace EUR EUR EUR EUR F-92400 Courbevoie 42,069 430,096 20.52 61,553 61,553 46,027 618,076 138,950 28,240 SEPR 18, avenue d’Alsace EUR EUR EUR EUR F-92400 Courbevoie 63,361 4,087 25.73 53,310 53,310 76,563 209,045 1,169 1,545

OTHERS Subsidiaries over 50%-asned •Total French companies 3,899 3,899 217,216 680 •Total foreign companies 26,032 24,816 409,630 4,828,808 2,784 Holdings of between 10 and 50% •Total French companies ––– – •Total foreign companies 648 648 – 354 Other 544,770 508,106 94,221 4,218 TOTAL 8,233,885 8,196,005 2,332,113 4,828,808 441,679

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iNote 17: Financial commitments Commitments relating to financial instruments concerning excluding leases interest rate risks are as follows:

Commitments given (in € thousands) Amount Swaps – borrowers at fixed rates/variable rate 139,629 Swaps – lenders at fixed rates/variable rate 1,605,452 (in € thousands) Amount Swaps – variable rate/variable rate 7,669 Guarantees (1) 5,326,782 Swaps – fixed rate/fixed rate – Pensions and other Cross-currency swaps – borrowers at fixed post-retirement benefits (2) 47,426 rates/variable rate 372,235 Other commitments given: Cross-currency swaps – lenders at fixed •concerning joint ventures 4,546 rates/variable rate 269,253 5,378,754 TOTAL Cross-currency swaps – variable rate/ 6,647 Including: variable rate 154,394 (1) Consolidated companies 5 264 279 Cross-currency swaps – fixed rate/fixed rate (25,000) (2) The amount in respect of pensions and other post-retirement benefits Caps purchased / (sold), net includes commitments for retirement indemnities and supplementary in- Swaps on raw materials - borrowers 17,976 house funding. Pension obligations are determined by actuarial valuations 17,746 using a method based on projected end-of-career salaries (the projected unit Swaps on raw materials - lenders credit method). The face value amount of commitments given and received in the form of swaptions and early repayments of borrowings Commitments received amounted to €138 million and €40 million respectively.

(in € thousands) Amount iNote 18: Lease commitments Other commitments received: Debt waivers with a clawback clause 3,720 (in € thousands) Head office TOTAL 3,720 Cost 80,798 Including: Depreciation: 3,720 •other investments •Accumulated at beginning of year 8,663 Commitments relating to financial instruments concerning •Charge for the year 1,464 foreign currency risks are as follows: TOTAL 10,127 Installments paid: 53,452 (in € thousands) Amount •Accumulated at beginning of year 9,220 Equivalent in euros of forward purchases • Paid during the year and sales of foreign exchange 30,888 TOTAL 62,672 Options purchased 26,400 Installments to be paid: Options sold 26,400 •within one year 8,975 Currency swaps 594,809 • between one and five years 35,902 •beyond five years 773 TOTAL 45,650 Residual values: •within one year – •between one and five years – •beyond five years 12,120 TOTAL 12,120

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iNote 19: Employees liability issues have been raised as mentioned above) and 18 cases have been appealed to the Cour de Cassation by the French Social Security authorities in relation to procedural matters. Weighted average number of employees In addition, at December 31, 2003, 71 suits based on inexcusable fault had been filed by current or former employees of nine other € 2003 2002 2001 (in thousands) French companies in the Group, in particular involving circum- Excluding the stances where equipment containing asbestos had been used to German branch protect against heat from furnaces. Managers 162 166 167 In 2003, 9 suits were dismissed at the request of employees or Supervisors 65 67 71 former employees further to claims made to the Asbestos Victims Compensation Fund. Other employees 8711 235 240 249 TOTAL At December 31, 2003, 16 lawsuits were completed: 9 through Of which fixed judgments by the Cour de Cassation which dismissed appeals term contracts 447issued by employees or former employees against Court of Appeal decisions dismissing the claims of inexcusable fault, 4 through judgments issued by the Social Security courts and 3 Remuneration of directors and corporate officers by Court of Appeal decisions finally dismissing employees’claims. For the 46 suits outstanding at the end of 2003, 6 are in the The total direct and indirect remuneration received by Corporate investigation stage by the French Social Security authorities, Officers from Group companies in France and abroad amounted 29 are pending before the Social Security courts and 11 before the to €12.7 million in 2003, €13 million in 2002 and €12.9 million in Court of Appeal. 2001. The gross variable portion included in these remuneration amounts came to €4.5 million in 2003, €4.6 million in 2002 and In accordance with a law dated December 23, 2000 a fund has €4.7 million in 2001. been created in France known as the FIVA. It is intended to fully Attendance fees paid to Directors amounted to €0.5 million for compensate the loss of persons officially recognized as having 2003, 2002, and 2001. contracted occupational diseases caused by asbestos, as well as of all persons who have been exposed to asbestos on French terri- i tory. Any person who makes a claim to and accepts an offer of Note 20: Litigation compensation from the fund will be barred from taking legal In France, further lawsuits were filed in 2003 by former action to obtain other compensation on the same grounds. employees (or persons claiming through them) of Everite and However, once the applicant has accepted an offer of compensa- Saint-Gobain PAM (“the employers”) – which in the past had tion, the fund must make a subrogated claim against any carried on fiber-cement operations – for asbestos-related occu- employer considered to be responsible for the loss concerned. pational diseases, with the aim of obtaining supplementary On January 27, 2003 the fund published guidelines in the form of compensation over and above the assumption of occupational a compensation scale. diseases compensation by the French Social Security. A total of At December 31, 2003, as mentioned above, as far as the Company 461 such lawsuits have been issued against the two companies is aware, 13 employees or former employees of French Group since 1997. companies had discontinued lawsuits filed in order to make a At the end of 2003, 164 of these 461 lawsuits had been completed claim to the Asbestos Victims Compensation Fund. both in relation to liability and quantum. In all of these cases, the employers were held liable on the grounds of “inexcusable fault”. However, in 156 of these 164 rulings, the Social Security authori- Overview of asbestos-related litigation ties were ordered to pay the compensation for the victims for in the United States procedural reasons (statute of limitations, liability issues (“inop- In the United States, three Group companies that once manufac- posabilité”)). tured products containing asbestos such as fiber-cement pipes, Everite and Saint-Gobain PAM were held liable for the payment of roofing products or specialized insulation, are facing legal action €1.4 million in compensation in the 8 other lawsuits. from persons other than the employees or former employees of Out of the 297 lawsuits outstanding against Everite and Saint- the companies. The claims are based on alleged exposure to the Gobain PAM at December 31, 2003, the merits of 101 have been products although in the vast majority of cases the claimants decided but the compensation awards have not yet been made, cannot demonstrate any specific exposure to one or more prod- pending issue of medical reports. The employer company has ucts, or any specific illness or physical disability. The majority of been held liable to pay compensation in only one of the cases. In these claims are made simultaneously against many other non- the other 100 the Social Security authorities were ordered to pay Group entities which have been manufacturers, distributors, the compensation for the victims for the same procedural installers or users of products containing asbestos. reasons described above (statute of limitations, liability issues CertainTeed, the main US subsidiary involved in these cases, was (“inopposabilité”)). for a long period a member of the Center for Claims Resolution, Out of the 196 remaining lawsuits, 4 were dismissed in 2003 as a an organization which grouped together defendants facing the claim was made to the French Asbestos Victims Compensation same type of claims and handled the defense of all such claims. Fund (FIVA). At December 31, 2003 the procedures relating to the The organization also allocated court awards, negotiated out of merits of the other 192 cases were at different stages: 21 are court settlements and defense costs among its members on the involved in administrative proceedings with the French Social basis of a pre-agreed pro-rata formula. Since February 1, 2001 the Security authorities, 65 are pending with the Social Security organization no longer represents its members in this way, and courts, appeals have been issued to the Court of Appeal in CertainTeed now assumes directly the defense of claims made 88 cases in which the employers were held liable for inexcusable against it, which have increased significantly since 2001. fault (including 64 cases in which statute of limitations and/or

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Developments in 2003 million), comprised of insurance coverage available at that date € 2001 and 2002 were marked by sharp increases in new lawsuits and the provision referred to above, compared with 426 million filed against CertainTeed with 60,000 and 67,000 new cases filed at December 31, 2002 (US $446 million). respectively, compared with 19,000 in 2000. In 2003, approxi- Cash flow impact mately 62,000 new suits were filed, including some 29,000 in Total compensation paid for these cases – including claims Mississippi. This exceptional surge in claims filed in Mississippi settled in 2002 but paid out in 2003, and those fully settled and was due to the State’s adoption of a new law making this state a paid in 2003 – amounted to €135 million in 2003 (US $153 less plaintiff-friendly venue for these claims. Numerous claims million), versus €109 million (US $103 million) in 2002. US $148 were filed in the last few months of 2002 before the new law million of this amount has been or will be covered by insurance. came into effect from January 1, 2003. A significant number of these were only recorded in the first few months of 2003. A total Outlook for 2004 of approximately 29,000 new claims were filed in Mississippi in Although trends relating to the number of new suits have been 2003, compared with 18,000 for 2002. This exceptional surge favorable since the third quarter of 2003, the most significant tailed off towards the end of the first half of 2003. In the second drop has been in “mass claims” which generally have a lower half, total new claims amounted to approximately 14,000 average cost of claims settled than the overall average figure. (including 1,000 in Mississippi), a substantial reduction Therefore, unless the current trends change again, the average compared to the first half of the year (48,000 including 28,000 in cost of claims settled is expected to increase in the future, most Mississippi). As in 2002, the vast majority of these new claims are likely from 2004 onwards. “mass”actions which can involve hundreds or even thousands of If the bill currently being considered by the US Senate is plaintiffs making claims for damages against dozens of compa- adopted, claimants will no longer be able to file the sort of nies operating in different economic sectors, without providing claims described above in the United States. If enacted the bill evidence of any specific exposure to any product allegedly manu- would prohibit employees who have been exposed to asbestos factured by CertainTeed, or of any specific illness or physical from bringing their claims to court. Instead, such employees disability. Only a very low proportion of these new lawsuits would receive compensation for their exposure from a trust involve a serious illness, cancer or mesothelioma. fund. The bill was adopted by the US Senate Judiciary Almost all of the claims against CertainTeed are settled out of Committee on July 10, 2003 but at the date when this report court. Approximately 54,000 claims were settled in 2003 was prepared the full Senate had not yet voted on it. However, (compared with 44,000 in 2002). In addition, at least 7,000 the Senate Republican Leader has publicly announced that he outstanding claims were placed on the inactive docket which intends to put the bill on the Senate floor for consideration in means that they will not be heard until the plaintiff provides April 2004. evidence of actual loss or injury. Taking into account the 107,000 outstanding cases at the end of 2002 and the new cases having arisen during 2003, as well as claims settled or placed on the inactive docket, some 108,000 claims were outstanding at In Brazil, former Group employees suffering from asbestos- December 31, 2003. related occupational illness are offered either exclusively finan- The average individual cost of settlement based on all claims cial compensation or medical assistance for their lifetime settled increased to approximately US $2,100 in 2003, from combined with financial assistance. Only a small number of US $1,955 a year earlier. asbestos-related lawsuits were outstanding at December 31, 2003 Impact on the Group’s results and they do not represent a material risk for the companies concerned. The Group recorded a €100 million charge in 2003 to make provi- sion for future developments in relation to these claims, including €50 million recorded in the first half of the year. The i same charge was recorded in 2002. At December 31, 2003 the Note 21: Subsequent events Group’s total cover for asbestos-related claims against Certain- On January 29, 2004 the Board of Directors of Compagnie de Teed in the United States amounted to €341 million (US $431 Saint-Gobain decided to cancel 6,799,832 treasury shares with a par value of €4 each.

164 SAINT-GOBAIN • 2003 FINANCIAL STATEMENTS SAINT-GOBAIN RA 2003 Soc GB 19/05/04 7:48 Page 165

iNote 22: Recommended appropriation of income

(in € thousands) Sources: Unappropriated retained earnings at Dec. 31, 2003 (1) 1,090,363 Net income for the year 513,574 (1) Reflects a €370 thousand adjustment to the 2002 dividend corresponding Appropriations: to the 336,000 treasury shares acquired and 8,300 treasury shares sold between March 20, 2003, the date of the Board meeting approving the finan- Appropriation to reserves: cial statements, and June 23, 2003 when payment of the dividend began. •Untaxed reserves (2) Representing the net impact of the appropriation of a provisional amount •Long-term capital gains reserve (2) 290,391 of €291,929 thousand for 2003 less a €1,538 thousand adjustment to the provisional appropriation to long-term capital gains reserves made in 2002, (3) 386,972 Dividends resulting in a net appropriation of €290,391 thousand. Unappropriated retained earnings 926,574 (3) On the basis of 341,025,135 shares (capital stock at January 29, 2004 after TOTAL 1,603,937 1,603,937 cancellation of 6,799,832 shares), less 4,527,674 treasury shares held at February 29, 2004, i.e. 336,497,461 dividend-earning shares.

Five-year financial summary

2003 2002 2001 2000 1999 (in € thousands 1 - Capital stock at year-end Capital stock 1,391,300 1,364,043 1,364,138 1,363,412 1,395,788 Number of common shares outstanding 347,824,967 341,010,680 85,258,628 85,213,263 87,236,750 2 - Operations and results for the year Sales excluding taxes (1) 163,379 156,150 149,431 138,313 113,942 Earnings before tax, depreciation and provisions 430,896 507,093 1,115,028 1,087,460 600,175 Income tax 69,888 30,396 15,020 (46,464) (36,209) Net income after tax, depreciation and provisions 513,574 595,,916 1,092,872 1,014,611 573,860 Dividend distribution 386,972 (2) 379,141 (3) 378,364 (4) 356,860 (5) 300,916 (6) 3 - Earnings per share (in €) Earnings per share before tax, depreciation and provisions 1.24 1.49 13.08 12.76 6.88 Earnings per share after tax, depreciation and provisions 1.48 1.75 12.82 11.91 6.58 Net dividend per share 1.15 1.13 4.50 4.30 3.60 4 - Personnel (7) Average number of employees during the year 235 240 249 249 239 Total payroll cost for the year 24,991 25,094 24,389 20,525 19,066 Total benefits for the year 13,863 13,850 12,956 11,330 9,139 (1) Represents royalties and other services. (2) On the basis of 341,025,135 shares (capital stock at January 29, 2004 after cancellation of 6,799,832 shares), less 4,527,674 treasury shares held at February 29, 2004, i.e. 336,497,461 dividend-earning shares. (3) Reflects a €370 thousand adjustment due to the 336,000 treasury shares acquired and 8,300 treasury shares sold between March 20, 2003, the date of the Board meeting approving the financial statements, and June 23, 2003 when payment of the dividend began. (4) Reflects a €118 thousand adjustment due to the 26,150 treasury shares sold between March 28, 2002, the date of the Board meeting approving the finan- cial statements, and June 24, 2002 when payment of the dividend began. (5) Reflects a €451 thousand adjustment due to the 104,854 treasury shares acquired between March 29, 2001, the date of the Board meeting approving the financial statements, and July 2, 2001 when payment of the dividend began. (6) Reflects a €3,889 thousand adjustment due to the 1,080,200 treasury shares acquired between March 30, 2000, the date of the Board meeting approving the financial statements, and July 3, 2000 when payment of the dividend began. (7) Personnel figures exclude the German branch.

SAINT-GOBAIN • 2003 FINANCIAL STATEMENTS 165 SAINT-GOBAIN RA 2003 Soc GB 19/05/04 7:48 Page 166

Statutory auditors’ report on the financial statements

For the year ended December 31, 2003 cière) of August 1, 2003 and which came into effect for the first time this year, we bring to your attention the following matters: •The Company carries out impairment tests on a yearly basis for To the shareholders, financial investments and investments in subsidiaries and affili- ates. Based on the information available at the time of our audit, we assessed the approach used by the Company – as described in In compliance with the assignment entrusted to us by your Note 1 to the financial statements – and we ensured that the esti- Annual General Meeting, we hereby report to you, for the year mates made by the Company at December 31, 2003 were reason- ended December 31, 2003 on: able. • the audit of the accompanying financial statements of •As described in Notes 1 and 11 to the financial statements, the Compagnie de Saint-Gobain, Company records a provision for potential tax liabilities for tax •the justification of our assessments, which may be payable in the future due to the worldwide consol- •the specific verifications and information required by the law. idated tax regime and the French integrated tax system. Based These financial statements have been approved by the Board of on the information available at the time of our audit, we ensured Directors. Our responsibility is to express an opinion on these that the methods used to determine the provision for potential financial statements based on our audit. tax liabilities, as well as the disclosures relating to said provision provided in the Notes to the financial statements, were reason- Opinion on the financial statements able. We conducted our audit in accordance with the professional These assessments were made in the context of our audit of the standards applied in France. Those standards require that we financial statements, taken as a whole, and therefore contributed plan and perform the audit to obtain reasonable assurance to the formation of the unqualified opinion expressed in the first about whether the financial statements are free of material part of this report. misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the finan- Specific verifications and information cial statements. An audit also includes assessing the accounting We have also performed the specific verifications required by the principles used and significant estimates made by management, law, in accordance with the professional standards applied in as well as evaluating the overall financial statement presenta- France. tion.We believe that our audit provides a reasonable basis for our opinion. We have no comments as to the fair presentation and the conformity with the financial statements of the information In our opinion, the financial statements give a true and fair view given in the management report of the Board of Directors and in of the Company's financial position and its assets and liabilities the documents addressed to the shareholders with respect to the as of December 31, 2003 and of the results of its operations for the financial position and the financial statements. year then ended in accordance with French accounting principles and regulations. In accordance with the law, we have verified that the manage- ment report contains the appropriate disclosures as to the acqui- Justification of our assessments sition of shares and controlling interests, together with the identity of the principal shareholders and cross-shareholdings. In accordance with the requirements of article L. 225-235 of the Commercial Code relating to the justification of our assessments, introduced by the Financial Security Act (Loi de Sécurité Finan- Paris, March 25, 2004

The Statutory Auditors

PricewaterhouseCoopers Audit SECEF

Pierre Coll Christian Marcellin Jacques Tenette Francis Vallet

This is a free translation into English of the statutory auditors’ report issued in the French language and is provided solely for the convenience of English speaking readers.The statutory auditors’report includes information specifically required by French law in all audit reports, whether qual- ified or not, and this is presented below the opinion on the consolidated financial statements.This information includes an explanatory paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated financial statements. This report, together with the statutory auditors’ report addressing financial and accounting information in the Chairman’s report on internal control should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

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iFees paid by the Group to the Statutory Auditors and members of their networks in 2003

PricewaterhouseCoopers PricewaterhouseCoopers SECEF SECEF 2003 2002 2003 2002 (in € millions) Amount % Amount % Amount % Amount % Audit • Statutory audit and contractual audits France 2.8 20% 2.9 13% 0.3 100% 0.3 100% Outside France 7.7 55% 8.0 36% -- -- Total 10.5 75% 10.9 49% 0.3 100% 0.3 100% • Other engagements 1.7 12% 1.1 5% -- -- Sub-total 12.2 87% 12.0 54% 0.3 100% 0.3 100% Other services •Legal and tax advisory services France ------Outside France 1.7 12% 1.7 8% -- -- Total 1.7 12% 1.7 8% -- -- •Information technology (a) France --0.1 0% -- -- Outside France --8.4 38% -- -- Total --8.5 38% -- -- •Internal audit ------•Other 0.1 1% 0.1 0% -- -- Sub-total 1.8 13% 10.3 46% -- -- TOTAL 14.0 100% 22.3 100% 0.3 100% 0.3 100%

(a) Corresponding to services relating to the implementation of Enterprise Resource Planning systems carried out by the network’s consulting entity, prior to its disposal on September 30, 2002.

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V• Information on subsidiaries

France Holds: • Saint-Gobain Autover - France (100%). Distribution and pro- iSaint-Gobain Glass France cessing of flat glass for the automobile industry. Sales: €21.4 mil- lion. Employees: 73. 100%-owned by Vertec. • Saint-Gobain Sekurit India (85.8%) - India. Sales: 570.6 million Manufacturing and processing of flat glass. Indian rupees. Employees: 351. Float glass plants in Aniche (Nord) and Chantereine (Oise), north- ern France. 2003 sales: €237.7 million. iSaint-Gobain Isover Employees: 1,000. These figures include Eurofloat, a float glass plant in Salaise-sur- 100%-owned by Spafi. Sanne (Isère, southeastern France). Production and processing of glass wool and rock wool insula- tion products. Subsidiaries and holdings Plants in Orange (Vaucluse, southeastern France), Chalon-sur- • Saint-Gobain Sekurit France - France, Saint-Gobain Glass Exprover Saône (Saône-et-Loire, eastern France), Saint-Étienne-du-Rouvray - Belgium. See company profiles. (Seine- Maritime, northwest France), Rantigny (Oise, northern • Saint-Gobain Produits Industriels (SGPI), M. O. Pays de Loire, France). Comptoir des Glaces et Produits Verriers, C.G.G. M. O. Atlantique, 2003 sales: €235.9 million. Les Vitrages de Saint-Gobain Normandie, M. O. Semiver-Climaver, Employees: 897. M. O. Charentes-Limousin, M. O. Armorique, Miroiterie du Rhin, Société Verrière Française (SVF), Sovedys, Sivaq, Centre Est Vitrage Subsidiaries and holdings (CEV), Charles André, Soprover, Société Verrière de l’Atlantique •Saint-Gobain Eurocoustic - France (51%). Production of rock wool (SVA), Le Vitrage du Midi (LVM), Glassver, Gobba Vitrage, Auvergne insulation products. Plant in Genouillac (Creuse, central France). Isolation,Vitrages Isolants d’Auvergne, Alp’Verre, Courbu Vitrages, Sales: €35.7 million. Employees: 166. Verreries d’Aurys (100%),Pierre Pradel (73.9%), Wehr Miroiterie •Saint-Gobain Ecophon SA - France (50% + 50% by Saint-Gobain (100%), Emaillerie Alsacienne (100%),Technifen (100%),Techniverre Ecophon Product. A/S Denmark). Acoustic ceilings. Sales: €13.6 (100%) - France. million. Employees: 25. Distribution and processing of flat glass products for the build- •Saint-Gobain Recherche - France (32.7%). See Saint-Gobain Glass ing industry. Sales of the processing subsidiaries: €418.7 million. France. Employees: 3,255. •Samin - France (19.6%). See Saint-Gobain Emballage. • Eurokera (50%). Keraglass (plant in Bagneaux-sur-Loing, Seine- • Saint-Gobain Isover Beijing - China (29.5%). See Saint-Gobain et-Marne, Paris area) - France (50%). Production and sale of glass China Invest CY. ceramic cooktops. Eurokera North America - USA (50%). Plant in Fountain Inn (South Carolina); Saint-Gobain Euroveder Italia – i Italy (100%). Tempered glass for home appliances. Sales: €121.8 Saint-Gobain Emballage million. Employees: 513. Owned 20.5% by Compagnie de Saint-Gobain and 79.5% by Vertec. • Saint-Gobain Sovis - France (100%). Tempered glass for home Manufactures glass containers (industrial bottles and jars). appliances, industrial and scientific optics, radiation-proof glass. Plants in Chalon-sur-Saône (Saône-et-Loire), Cognac (Charente), Plants in Jouarre (Seine-et-Marne, Paris area) and Château-Thierry Lagnieu (Ain), Oiry (Marne), Saint-Romain-le-Puy (Loire), and € (Aisne, northern France). Sales: 22.1 million. Employees: 195. Vauxrot (Aisne). • Verrerie de Saint-Just - France (100%). Decorative glass. Plant at 2003 sales: €569.5 million. Saint-Just-Saint-Rambert (Loire, central France). Employees: 89. Employees: 2,064. • Saint-Gobain Sully - France (100%). Flat glass for trains and the aeronautics industry. Plant in Sully-sur-Loire (Loiret, central France). Subsidiaries and holdings Employees: 459. Holds: 100% of Saint-Gobain Pyramid Ltd - Canada. • Saint-Gobain Desjonquères - France. Saint-Gobain Oberland Plant in Dorval (Quebec). AG - Germany, Saint-Gobain Vetri - Italy. See company profiles. • Samin (29.4%). See Saint-Gobain Emballage. •Saint-Gobain Recherche - France (26.3%). See Saint-Gobain Glass • Saint-Gobain Glass Logistics - France (100%).Transport. France. • Saint-Gobain Recherche - France (32.7%).The remainder of this •VOA Verrerie d’Albi - France (100%). Glass containers (bottles). company’s capital stock is held by other French Group compa- Plant in Albi (Tarn). Sales: €62.7 million. Employees: 319. nies. Headquarters in Aubervilliers (Seine-Saint-Denis, Paris area). •Samin - France (51%). Operates quarries. Employees: 167. •Saga Decor - France (51%). Decoration of bottles and jars. Sales: €22.6 million. Employees: 241. iSaint-Gobain Sekurit France •Vetreria Etrusca SRL - Italy (24%). Glass containers. 100%-owned by Saint-Gobain Glass France. Processing for the automobile industry. i Plants in Aniche (Nord) and Chantereine (Oise), Saint-Gobain Desjonquères northern France. 100%-owned by Saint-Gobain Emballage. 2003 sales: €292.2 million. Manufactures small glass bottles used primarily in the perfume Employees: 1,143. and pharmaceutical industries. These figures include those of Société Verrière d’Encapsulation. Plants in Mers-les-Bains (Somme, northern France) and Sucy-en- Encapsulation of glass for the automobile industry. Brie (Val-de-Marne, Paris area). 2003 sales: €402.6 million. Employees: 1,897.

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Subsidiaries and holdings • Lapeyre - France and international (100%). Distribution of home •Saint-Gobain Kipfenberg GmbH - Germany (100%). Small glass improvement products under the following banners: Lapeyre- bottles. Plant in Kipfenberg. Sales: €51.2 million. Employees: 210. La Maison, K par K, Gimm, Atlantique, Menuiseries Françaises, Holds Saint-Gobain Calmar GmbH (100%) - Germany. See company Oxxo,Les Zelles, Okfens (Poland) and Telhanorte (Brazil). Sales: € profile. 1,414.2 million. Employees: 9,598. • Saint-Gobain VG Emballage - France (100%). Distribution of • La Plateforme Polska - Poland (100%). Sales: 49.5 million zloty. glass and plastic containers and fittings. Sales: €34.8 million. Employees: 136. Employees: 77. • La Plataforma Para La Construcción - Mexico (100%). Sales: 49.5 •Verreries de l’Orne - France (100%). Decoration of glass con- million pesos. Employees (including subsidiaries): 146. tainers. Employees: 261. Holds Verreries de la Somme (100%). Employees: 251. i •SGD Manufacturing, Inc. - USA (100%). Perfume flasks. Plant in Saint-Gobain Matériaux de Construction Covington. Sales: $41.3 million. Employees: 202. 100%-owned by Compagnie de Saint-Gobain. •SGD Inc. - USA (100%), SGD UK - United Kingdom (100%), SGD Holding company. Italia - Italy (95% + 5% by SGPPI). Distribution companies. Holds: • Saint-Gobain Weber - France (100%). Produces industrial mor- i tars in 20 countries. Holds: 100% of Weber & Broutin France; Saint-Gobain Vetrotex France 100% of Saint-Gobain Weber Cemarska (Spain); 100% of Saint- 100%-owned by Spafi. Gobain Weber Mitteleuropa (Austria); 50% of Saint-Gobain Manufactures and sells fiberglass for reinforcements. Quartzolit - Brazil. Produces tile glues. Plants in Jandira (São Plant in Chambéry (Savoie, southeastern France). Paulo), Santa Luzia (Minas Gerais), Abreu and Lima (Pernambuco) 2003 sales: €94.2 million. and Viamao (Rio Grande do Sul). Sales (including subsidiaries): € Employees: 483. 759 million. Employees (including subsidiaries): 3,522. Holds: • Saint-Gobain Stradal - France (100%). Produces industrial € Saint-Gobain Vetrotex International - France (67.9%).The remain- cements at twenty-five production plants in France. Sales: 146.8 der being held by other companies of the Reinforcemnts Division. million. Employees: 988. Has holdings in:Tuyaux et Agglomérés Research and Development center, export sales. Headquarters Vendéens - France (49%); Egyptian Concrete Pipe Company - in Chambéry (Savoie, southeastern France). Holds: Saint-Gobain Egypt (30%). Produces concrete pipes. Vetrotex Renforcement - France (100%); Saint-Gobain Vetrotex • Novatech KG - Germany (100%). Plant in Kolbermoor. Produces € Glass Mat - France (100%); Saint-Gobain Vetrotex Reinforcement cement-glass composites for roofing and wall facings. Sales: 4.2 GmbH - Germany (100%);Verigex - Italy (100%);Vetrotex Svenska million. Employees: 14. AB - Sweden (100%); Saint-Gobain Vetrotex UK - United Kingdom (100%);Vetrotex Reinforcement Bohemia - Czech Republic (100%). i Distribution companies. Saint-Gobain Vetrotex Korea Ltd - South Saint-Gobain PAM Korea (98.6%). See company profile. Saint-Gobain Syncoglas NV Owned 8.1% by Compagnie de Saint-Gobain and 91.9% by Spafi. – Belgium (100%). Sales: €31.3 million. Employees: 63. Saint-Gobain Ductile cast-iron pipes and hydraulic connectors for water-sup- Vetrotex Thailand - Thailand (100%). Sales: 482.7 million thai baht. ply, irrigation and wastewater networks. Cast-iron products for the Employees: 224. NSG Vetrotex KK - Japan (100%). See company building industry. profile. Saint-Gobain Recherche (8.2%) - France (see under Saint- Plants in Eastern France, in Pont-à-Mousson, Blénod, Foug, Gobain Glass France). Hangzhou Saint-Gobain Vetrotex - China Liverdun,Toul (Meurthe-et-Moselle), Bayard (Haute-Marne). (90%). Sales: 104.4 million yuan. Employees: 358. Saint-Gobain 2003 sales: €807.1 million. Vetrotex India - India (100%). Sales: 925.6 million Indian rupees. Employees: 2,918. Employees: 330. Subsidiaries and holdings • Halbergerhütte GmbH - Germany; Saint-Gobain Canalización iPartidis - Spain; Saint-Gobain Plc - United Kingdom; Saint-Gobain Condotte SpA - Italy; Saint-Gobain Canalização - Brazil. See company profiles. 100%-owned by Compagnie de Saint-Gobain. • Saint-Gobain Seva - France (100%). Industrial equipment, glass Distribution of building materials. molds, fiberglass plates for insulation, door fittings. Plant in 2003 sales: €6.1 billion. Chalon-sur-Saône (Saône-et-Loire, eastern France). Sales: €52 mil- Employees (including subsidiaries): 31,556. lion. Employees: 372. Holds: • SADIP - Saudi Arabia (20%). Produces ductile cast-iron pipes. • Saint-Gobain Plc - United Kingdom (72.7%). See company profile. • Also has holdings in: Saint-Gobain Pipe Systems Belgium - • Point.P (100%) - France. Building materials distribution through Belgium (99.9%). Sales: €23.2 million. Employees: 26. Saint-Gobain 11 regional companies (Brittany, Central France, Eastern France, Pipe System BV - Netherlands (100%); Saint-Gobain Condutas - Paris region, Loire region, Southern France, Northern France, Portugal (99.5%); Saint-Gobain Trubni Systemy - Czech Republic Normandy, PACA, Rhône-Alpes, South-West France). 4 national (100%). Sales: 218.6 million Czech koruny (€6.9 million). Employees: companies (CEDEO, SFIC, Asturienne, Pum Plastiques). La 21. Saint-Gobain Pipe Systems OY - Finland (100%); Saint-Gobain Plateforme du Bâtiment banner (18 retail outlets in France and 3 Pipelines Co Ltd - China (71.6%). See Saint-Gobain China Invest in Spain). SG Point. P España + La Plateforme España. 1,454 retail CY. SG Xuzhou Pipelines Co. Ltd - China. Sales: 197.5 million yuan. outlets (1,400 in France, 25 in Spain, 1 in Belgium - Pum Plastiques, Employees: 361. SG Foundry Co. Ltd. – China (100%), Saint-Gobain and 7 in Poland – Pum Plastiques). Sales: €4,662.1 million. Canalización Argentina - Argentina (100%). SGC Antilles – France Employees: 21,611. (100%).

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Information on subsidiaries

iSEPR - Société Européenne Belgium. Manufactures and sells high-performance plastics. des Produits Réfractaires Sales of subsidiaries: €84 million. Employees of subsidiaries: 654. Holds: 90% of Saint-Gobain Ceramics Materials KK - Japan. Owned 25.7% by Compagnie de Saint-Gobain, 62.7% by Vertec Manufactures ceramic pellets and powders. Plant in Osaka. Sales: and 11.6% by Spafi. 4.6 billion Japanese yen. Employees: 83. Manufactures fused-cast refractory products used mainly for glass furnaces and various special products (pellets, grains and ceramic powders). iSaint-Gobain Abrasifs (France) Plant in Le Pontet (Vaucluse, southeastern France). 2003 sales: €193.4 million. 99.6% owned by Spafi and 0.3% by Vertec. Employees: 1,210. Manufactures bonded abrasives, grinding wheels and superabra- sives. Plants in Conflans-Sainte-Honorine (Yvelines), La Courneuve Subsidiaries and holdings and Bobigny (Seine-Saint-Denis), Amboise (Indre-et-Loire) and • SEPR Keramik GmbH & Co KG - Germany, SEPR Italia - Italy, Saint- Lisieux (Calvados). Gobain Ceramic Material A/S - Norway. See company profiles. 2003 sales: €157.3 million. • Savoie Réfractaires - France (100%). Manufactures special refrac- Employees: 1,019. tories. Plants in Vénissieux (Rhône, Lyon area) and Provins (Seine- Subsidiaries and holdings et-Marne, Paris area). Employees: 225. • Saint-Gobain Céramiques Avancées Desmarquest - France • Saint-Gobain Abrasivos SA - Spain, Saint-Gobain Abrasives SA - (100%). Manufactures fine ceramics for industrial uses, taps, Luxembourg, Saint-Gobain Abrasivi SpA - Italy, Saint-Gobain medical applications and thermal and electrical insulation. Plants Abrasives - Poland, Saint-Gobain Abrasives Pty Ltd. - South Africa. in Montreuil (Seine-Saint-Denis), Evreux (Eure) Courtenay (Loiret), See company profiles. Etrechy (Essonne) and Moissy Cramayel (Seine-et-Marne). Sales: • Pabsa - Colombia (100%). Manufactures coated abrasives and € €32.3 million. Employees: 333. grinding wheels. Plant in Mosquera. Sales: 8.1 million. Employees: • Saint-Gobain Cristaux & Détecteurs - France (100%). 92. Manufactures optical crystals and synthetic monocrystals for • Saint-Gobain Abrasivos - Venezuela (100%). Manufactures coat- chemical analysis. Plants in Saint-Pierre-lès-Nemours (Seine-et- ed abrasives and grinding wheels. Plants in Maracay and Los € Marne, Paris area) and Gières (Isère, southeastern France). Sales: Teques. Sales: 4.4 million. Employees: 71. €21.1 million. Employees: 154. • Saint-Gobain Abrasives AB - Sweden (100%). Abrasives. Sales: • Saint-Gobain Quartz S.A.S. - France (100%). Manufactures silica 170.1 million Swedish kronor. Employees: 45. parts for the chemical industry, silica crucibles and reactor tubes • Saint-Gobain Abrasives Nederland - Netherlands (100%). Holds for the semi-conductor industry, silica wool and yarn for the 100% of Saint-Gobain Abrasives BV. Manufactures thin grinding space industry, Micaver insulating materials, piezoelectric ceram- wheels and bonded abrasives. Plants in Eibergen and Vaals € ics. Plant in Saint-Pierre-lès-Nemours (Seine-et-Marne, Paris area). (Netherlands). Sales: 96.6 million. Employees: 455. Sales: €18.7 million. Employees: 195. Holds: Saint-Gobain Quartz • Saint-Gobain Abrasives NV - Belgium (100%). Employees: 21. Pte - Singapore (100%). Manufactures tubes for the semi-con- • Saint-Gobain Abrasives Shanghai (68%) - China. See Saint- ductor industry. Saint-Gobain Quartz SA (Suisse) - Switzerland Gobain China Invest. CY. (100%). Processing of quartz parts. • Saint-Gobain Abrasives Australia (100%) - Australia. Sales: 82.9 • Saint-Gobain Matériaux Céramiques - France (100%). Produces million Australian dollars. Employees: 264. Manufactures abra- seeded gel. Plant in Courtenay (Loiret, south of Paris area). sive grinding wheels and coated abrasives. Plants in Lidcombe Employees: 28. and Campbellifield. € • Saint-Gobain Centre de Recherche et d’Etudes Européennes - • SG Norton Hamplas (50%) - Indonesia. Sales: 7.1 million. France (35%), the remainder being held by other companies of Employees: 209. Plant in Surabaya. the Ceramics & Plastics Division. Center in Cavaillon (Vaucluse, southeastern France). i • Valoref SA -France (100%). Recycling. Spafi • Saint-Gobain Ceramicas Industriales - Spain (100%). 100%-owned by Compagnie de Saint-Gobain. Manufactures technical ceramics and distributes high-per- Holding company. formance plastics. Plant in Castellbisbal. Employees: 72. Holds: • Beijing SEPR Refractories - China (65.9%). See Saint-Gobain • Saint-Gobain Isover, Saint-Gobain Vetrotex France, Saint-Gobain China Invest CY. PAM, SEPR, Saint-Gobain Abrasifs, Saint-Gobain Performance • SEPR Refractories India Ltd - India (100%). Manufactures fused- Plastics Europe (France), Saint-Gobain Plc - United Kingdom, cast refractory products. Plant in Palakkad. Employees: 178. Saint-Gobain Corporation - USA, Saint-Gobain Technical Fabrics Canada - Canada, Saint-Gobain Abrasivos - Brazil. See company i profiles. Saint-Gobain Performance Plastics Europe • SGPPI (100%) - France. Holding company. Holds: Saint-Gobain 100%-owned by Spafi. Glass Benelux - Belgium; Saint-Gobain Cristaleria - Spain; Brasilit Holding company. SA - Brazil; Grindwell Norton Ltd - India, Saint-Gobain China Invest Holds: 100% of SG Performance Plastics Asti, SG Performance Cy Ltd – China, Hankuk Sekurit Ltd - South Korea (25%). See com- Plastics España, SG Performance Plastics Gessil, SG Performance pany profiles. Saint-Gobain Sekurit Thailand - Thailand (22.5%). See Plastics Verneret - France. 100% of SG Performance Plastics Saint-Gobain Sekurit Benelux SA.Verinvest Oy - Finland (17.3%). See Chaineux, 100% of SG PPL Gembloux and SG PPL Kontich - Saint-Gobain Glass Nordic A/S.

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iVertec iSaint-Gobain Sekurit 100%-owned by Compagnie de Saint-Gobain. Deutschland Beteiligungen GmbH Holding company. 100%-owned by Saint-Gobain Autoglas GmbH. Holds: Saint-Gobain Glass France, Saint-Gobain Emballage, SEPR Company managing Saint-Gobain Sekurit Deutschland KG and - France; Saint-Gobain Glass Italia - Italy. See company profiles. holding other equity interests. Subsidiaries and holdings •Saint-Gobain Sekurit Benelux - Belgium, Saint-Gobain Sekurit Germany €1 = DEM 1.96 Scandinavia - Sweden. See company profiles. •Autoglas Hansa - Germany (100%). Holds: Renz Autoglas GmbH Central and Eastern Europe (100%), SG Autover Deutschland (100%), Freudenberger Autoglas - Germany (100%); Autover Bilglas A/S - Norway (100%), Autover iSaint-Gobain ZN Deutschland Oy - Finland (100%); Autover Direktglas AB - Sweden (80%), Autover Benelux NV (100%);Walter Kigler - Austria (85%). Distribution of 100%-owned by Compagnie de Saint-Gobain. replacement automobile flat glass. Holding company. •SG Sekurit Finland Oy - Finland (100%). Faba Autoglas Technik Holds: GmbH - Germany (100%). Processing of automobile glass. • Saint-Gobain Glass Deutschland GmbH, Saint-Gobain Isover • Saint-Gobain Sekurit CR Spol SRO. - Czech Republic (100%). G+H AG, Saint-Gobain Vetrotex Deutschland GmbH, SG Produces laminated glass for the auto industry. Sales: €36.6 mil- Schleifmittel GmbH, Raab Karcher GmbH - Germany. See com- lion. Employees: 362. pany profiles. •Saint-Gobain Sekurit Hanglas Polska - Poland (87.8% + 12.2% by • 60% of Saint-Gobain Autoglas GmbH - Germany. Holds 100% of Hankuk Glass Industries). Produces automobile glass. Sales: €55.1 Saint-Gobain Sekurit Deutschland Verw/ Beteil GmbH - Germany. million. Employees: 800. • Saint-Gobain Sekurit (Shanghai) - China (100%). Sales: €24.4 million. Employees: 177. iSaint-Gobain Glass Deutschland GmbH •Saint-Gobain Sekurit Japan - Japan (100%). Sales: €11.9 million. Owned 60% by Saint-Gobain ZN Deutschland and 40% by Employees: 14. Glaceries de Saint-Roch Germania. Manufacturing and processing of flat glass. iSaint-Gobain Sekurit Deutschland KG Plants in Stolberg (float and processing), Herzogenrath (float), Cologne-Porz and Torgau (float and low-emission laminated Owned 99% by SG Sekurit Deutsch.Verw. GmbH and 1% by Saint- glass) and Mannheim (cast glass). Gobain Glass Deutschland GmbH. 2003 sales: €344 million. Manufactures flat glass products for the automobile industry. Employees: 1,200. Plants in Stolberg (laminated glass) and Herzogenrath (coated These figures include those of Flachglas Torgau GmbH (100%- glass). owned) and Verbundglas Torgau GmbH (also 100% owned). 2003 sales: €349.1 million. Employees: 1,956. Subsidiaries and holdings These figures include those of SG Sekurit Modulartechnik. • Saint-Gobain Deutsche Glas GmbH, Saint-Gobain Sekurit Extrusion of laminated and coated flat glass. Plant in Würselen. Deutschland KG - Germany, Saint-Gobain Glass Exprover - Belgium, Saint-Gobain Glass Polska - Poland, Saint-Gobain Glass Nordic Subsidiaries and holdings A/S - Denmark. See company profiles. • Saint-Gobain Sekurit Nutzfahrzeugglas GmbH (SGSN KG) - • Nitrasklo AS (40%),Venisklo Spol (100%) - Slovakia. Processing and Germany (100%). Manufactures flat glass for utility vehicules. distribution of flat glass for the building industry. Plant in Cologne-Porz. Sales: €36.1 million. Employees: 266. • Internationale Maatschappij Voor Het Beheer van •FABA Autoglas Technik - Germany (94%). Glasmaatschappijen BV (SGT) - Netherlands (100%). Holding company. Holds Eckelt Glas GmbH - Austria (95.5% + 4.5% by Saint-Gobain Deutsche Glass GmbH). Flat glass processing. Sales: iSaint-Gobain Isover G + H AG €51.4 million. Employees: 344. 99.9% owned by Saint-Gobain ZN Deutschland. • Saint-Gobain Glass India Ltd (66.3% + 29.3% by SGPPI + 4.4% Manufactures and sells mineral fibers and foams for thermal, by Grindwell Norton Ltd) - India. refrigeration and acoustic insulation as well as for fireproofing Sales: 3.03 billion Indian rupees. Employees: 316. under the trademark G + H Isover. Plants in Bergisch-Gladbach (Nordrhein-Westfalen), Ladenburg iSaint-Gobain Deutsche Glas GmbH (Baden-Würtemberg), Spire (Rheinland - Palatinat) and Lübz (Mecklenburg Vorpommern). 100%-owned by Saint-Gobain Glass Deutschland GmbH. 2003 sales: €326.8 million. A holding company controlling various subsidiaries which dis- Employees: 1,258. tribute and process flat glass for the building industry. Consolidated sales for 2003 of the Saint-Gobain Deutsche Glas group amounted to €198.7 million.The group employs 1,905 per- sons.

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Subsidiaries and holdings iSaint-Gobain Calmar GmbH •Saint-Gobain Isover SA - Switzerland, Saint-Gobain Isover Benelux Owned 100% by SGD Kipfenberg. - Netherlands, Saint-Gobain Isover A/S - Denmark. See company Manufactures plastic pumps. profiles. Plant in Hemer. •Saint-Gobain Isover Austria AG - Austria (99.8%). Manufactures 2003 sales: €71 million. € and sells insulating materials. Plant in Stockerau. Sales: 49.2 Employees: 536. million. Employees: 250. Holds: 74.3% of Saint-Gobain Orsil (+ 25.7% held by Saint-Gobain Isover G+H AG) - Czech Republic. Manufactures rock wool insulating materials. Plant in Castolovice. iSEPR Keramik GmbH & CO KG Sales: 1.204 million Czech koruny. Employees: 271. •Superglass Dammstoffe GmbH - Germany (100%). Distribution 100%-owned by SEPR. of insulating materials. Holding company. Holds: •Norton Beteiligungs - Germany (100%). Holding company. Holds iSaint-Gobain Vetrotex Deutschland GmbH Saint-Gobain Performance Plastics Pampus GmbH - Germany (100%). Manufactures and sells high-performance plastics for 100%-owned by Saint-Gobain ZN Deutschland. the medical and automobile industries and for other industrial Manufactures and sells fiberglass for reinforcements. equipment. Plant in Willich. Sales: €53.6 million. Employees: 318. Plant in Herzogenrath. Holds Saint-Gobain Advanced Ceramics Lauf GmbH - Germany € 2003 sales: 64.6 million. (100%). Manufactures and sells advanced ceramics. Plant in Lauf. Employees: 431. Sales: €16.3 million. Employees: 184. Holds 100% of Norton HTK Subsidiaries and holdings Vervaltungs GmbH. •Saint-Gobain IndustrieKeramik Düsseldorf - Germany (100%). • 99.7% of SG Vertex AS - Czech Republic. Sales: 4,652 million Produces refractory products. Plant in Düsseldorf. Sales: €19.8 Czech koruny. Employees: 1,233. Holds Saint-Gobain Velimat Polska million. Employees: 95. sp. z.o.o. (100%) - Poland. See company profiles. •Saint-Gobain Advanced Ceramics Mönchengladbach - Germany •12.1% of Saint-Gobain Vetrotex International - France. See Saint- (100%). Manufactures and sells advanced ceramics. Plant in Gobain Vetrotex France. Mönchengladbach. Sales: €12.3 million. Employees: 84. •100% of Saint-Gobain Vetrotex Glasvlies - Germany. • Saint-Gobain IndustrieKeramik Roedental - Germany (100%) . Produces high-performance refractory products. Plant in iHalbergerhütte GmbH Roedental. Sales: €48.2 million. Employees: 441. •Saint-Gobain Performance Plastics Cologne - Germany. Sales : 100%-owned by Saint-Gobain PAM. €13.3 million. Employees: 39. Holding company. •Saint-Gobain Ceramic Materials Kuppenheim - Germany (100%). Holds: Silicon carbide processing. Plant in Kuppenheim. Sales : €8.7 mil- •Saint-Gobain Plc - United Kingdom, Saint-Gobain Condotte SpA lion. Employees: 29. - Italy. See company profiles. •Saint-Gobain Gussrohr KG - Germany (100%). Ductile cast-iron pipes. Plants in Saarbrücken-Brebach (Saar) and Gelsenkirchen iSaint-Gobain Schleifmittel - (Ruhr). Sales: €162.1 million. Employees: 671. Beteiligungen GmbH •SG HES GmbH - Germany (100%). Sale of piping systems for the building industry. Sales: €41.5 million. Employees: 45. 100%-owned by Saint-Gobain ZN Deutschland. •Saint-Gobain Slevarna (100%) - Foundry in the Czech Republic. Holds: Sales:101 million Czech koruny Employees: 130. •100% of Saint-Gobain Diamond Products GmbH and Saint- Gobain Winter Diamantwerkzeuge. Produces superabrasive tools for the mechanical and stone-cutting industries. Plants in iSaint-Gobain Oberland AG Norderstedt.Total sales: €72.4 million. Employees: 598. •100% of Saint-Gobain Abrasives GmbH. Manufactures and sells 96.7% owned by Saint-Gobain Emballage. grinding wheels and superabrasives. Plants in Gerolzhofen and Company listed on the Frankfurt, Munich and Stuttgart Stock Wesseling. Sales: €81.2 million. Employees: 444. Exchanges. Manufactures glass containers (bottles, industrial jars and glass blocks). iRaab Karcher GmbH Plants in Bad Wurzach (Baden-Würtemberg), Neuburg (Bavaria), Essen (Nordrhein Westfalen) and Wirges (Rheinland). 100%-owned by Saint-Gobain ZN Deutschland. € Distributes building materials in Germany and in Eastern Europe. 2003 sales: 339.1 million. € Employees: 1,749. 2003 sales: 2 billion (including subsidiaries). Employees: 6,611 (including subsidiaries). Subsidiaries and holdings Holds: 100% of Raab Karcher Holland - Netherlands. Distribution € •Ruhrglas - Germany (100%). Holds 100% of GPS Glas Produktions of building materials in the Netherlands. Sales: 452.5 million. Service. Produces machines for the glass containers industry. Employees: 1,410. Sales: €19.4 million. Employees: 71. •Westerwald - Germany (100%). Holding company. •Zhanjiang Saint-Hua-Glass - China (35%). See Saint-Gobain China Invest CY.

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Benelux €1 = BEF 40.34 iSaint-Gobain Isover Benelux € 1 = NLG 2.20 100%-owned by Saint-Gobain Isover G+ H AG. Production and sale of insulating products. iSaint-Gobain Glass Benelux SA Plant in Etten-Leur (Netherlands). 2003 sales: €84.2 million. Owned: 88.7% by Compagnie de Saint-Gobain and 10.9% by Saint- Employees: 350. Gobain Benelux. Subsidiaries and holdings Manufacturing and processing of flat glass. Plants in Sambreville (2 float lines). • Saint-Gobain Isover Benelux NV - Belgium (99.8%). Distribution. 2003 sales: €145.1 million. • Saint-Gobain Cultilène BV - Netherlands (100%). Processes and Employees: 539. sells glass wool and rock wool products for hydroponic (soil-less) cultivation. Sales: €19.1 million. Employees: 58. Subsidiaries and holdings • Saint-Gobain Ecophon BV - Netherlands (30%). • Saint-Gobain Glass Exprover - Belgium, Saint-Gobain Plc - United Kingdom, Sas Van Gent Glasfabriek- Netherlands, Saint-Gobain Glass Nordic A/S - Denmark. See company profiles. iSaint-Gobain Diamond Products SA • Glaceries de Saint-Roch Germania - Germany (100%). Holding (Luxembourg) company. Holds: 40% of Saint-Gobain Glass Deutschland GmbH 100%-owned by Saint-Gobain Abrasifs (France). - Germany. See company profile. 40% of Saint-Gobain Autoglas Produces and sells diamond-tipped tools, disks and drills, as well GmbH - Germany. See Saint-Gobain Deutschland. as machines for cutting asphalt in the construction and civil • B & G Glas Group (99.7%), Frankenglas (100%), Boermans Glas engineering industries. Montage NV (99.9%), Burniat Glass SA (100%), Glorieux NV Plant in Bascharage (Luxembourg). (100%),Wagener Jowaco (100%), Hanin Miroiterie SA (100%), 2003 sales: €39.3 million. Techniver SA (100%), Climaglass NV (99.9%), Conforglass (99.9%), Employees: 157. Veiligheidsglas CGG NV (99.9%), Mirover NV and Romato (99.9%) Holds: 99.9% of Saint-Gobain Diamond Products - Belgium. - Belgium. Sales of subsidiaries: €83.1million. Employees of sub- Produces diamond-tipped tools. Plant in Mechelen. Sales: €3.1 sidiaries: 682. million. Employees: 30. • Koninklijke Saint-Gobain Glass NV - Netherlands (100%). Holding company for subsidiaries selling and processing glass products for the building industry. iSaint-Gobain Nederland 100%-owned by Compagnie de Saint-Gobain. iSaint-Gobain Glass Exprover Finance company. Owned 39% by Saint-Gobain Glass Deutschland GmbH + 27% by Saint-Gobain Glass Benelux + 18% by Saint-Gobain Glass France + 8% by Saint-Gobain Glass Italia + 8% by Saint-Gobain Cristaleria. € Export company of the Flat Glass Division. Promotes and coor- Spain 1 = ESP 166.39 dinates all exports of flat glass products manufactured by the Portugal €1 = PTE 200.48 Group outside areas where there are plants. Holds: Saint-Gobain Hellas - Greece (100%). Saint-Gobain Glass Exprover North America - USA (100%). iSaint-Gobain Cristaleria SA Owned 25.8% by Compagnie de Saint-Gobain + 71.8% by iSaint-Gobain Sekurit Benelux SA International Saint-Gobain + 2% by SGPPI. Manufactures and processes flat glass for the building and auto- 100%-owned by Saint-Gobain Sekurit Deutschland Beteiligung mobile industries, as well as insulating materials (glass wool GmbH. and rock wool). Flat glass processing for the auto industry. Flat glass plants in Arbós (float line), Avilès (float line), Madrid Plant in Sambreville. (Hortaleza), Renedo de Piélagos. 2003 sales: €93.9 million. Insulating material plant in Azuqueca de Henares. Employees: 453. Consolidated sales for 2003: €467.2 million. Holds: Saint-Gobain Sekurit Thailand - Thailand (72.5%+22.5% by Employees: 1,812. SGPPI). Sales: 1,601.5 million thai baht. Employees: 522. Autover International BV - Netherlands (100%). Distribution of replace- Subsidiaries and holdings ment automobile flat glass. Autover Distribution SA - Belgium •Saint-Gobain Vicasa, La Veneciana, Saint-Gobain Canalizacion, (100%). Saint-Gobain Vetrotex España - Spain; Saint-Gobain Glass Portugal - Portugal; Saint-Gobain Glass Exprover - Belgium; Saint-Gobain Sekurit Mexico, Saint-Gobain Glass Mexico, Saint-Gobain Vetrotex iGlasfabriek Sas Van Gent BV America (55.6% + 44.4% by Saint-Gobain Vetrotex España - Mexico; Saint-Gobain de Colombia, Pam Colombia SA - Colombia. See 100%-owned by Saint-Gobain Glass Benelux. company profiles. Manufactures reflecting glass, enameled glass and tempered • Autover Iberica - Spain (100%). Distribution of replacement glass. automobile flat glass. Plant in Sas Van Gent (Netherlands). •Wanner y Vinyas (100%) - Spain.Thermal and acoustic insulation. 2003 sales: €22.2 million. Sales: €52.9 million. Employees: 287. Employees: 139. •Industrias del Cuarzo Incusa (100%). Sand quarry.

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•Vislam (5%), Inmobiliaria Cristalvex (100%). iSaint-Gobain Vicasa SA •La Veneciana Norte (5%), La Veneciana Levante (5%), La Veneciana 99.9% owned by Saint-Gobain Cristaleria. Bética (5%), La Veneciana Canarias (5%). Manufactures glass containers (bottles, industrial jars and flasks). •Procustic - Spain (100%). Processing and distribution of acoustic Plants in Azuqueca de Henares (Guadalajara), Burgos, Dos insulation products. Hermanas (Sevilla); Jerez de la Frontera (Cadiz); Saragossa. •Portaglas SL - Spain (99.2% + 0.8% by La Veneciana). Sales: €26.8 2003 sales: €238.6 million. million. Employees: 181. Employees: 1,163. •Cristaleria de Hortaleza - Spain (100%). Sales: €20.7 million. These figures include those of Saint-Gobain Montblanc SA. •Iberisol - Portugal (65.2% + 22.3% by Wanner y Vinyas). Manufactures glass containers. Plant in Montblanc (Catalonia). Distribution of insulating products. •Vidrieria Argentina (VASA) - Argentina (49%). Sales: 90 million Subsidiaries and holdings Argentine pesos. Employees: 138. Manufactures flat glass for the • Saint-Gobain Cristaleria - Spain; Saint-Gobain Mondego - building industry. Portugal. See company profiles. •Cristaleria Andina - Panama (100%). • Saint-Gobain La Granja SA - Spain (100%). Manufactures glass •Holding Concorde SA - Colombia (51%). Inversiones Float Chile containers (flasks), insulators and moldings. Plant in La Granja Ltda - Chile (49%). (Segovia). Sales: €58.9 million. Employees: 345. Holds 100% of Saint-Gobain Calmar SA - Spain. Produces plastic pumps. Plant € iLa Veneciana in Barcelona. Sales: 47 million. Employees: 339. • Vidrieras Canarias (41%). Glass containers. Sales: €19.1 million. 100%-owned by Saint-Gobain Cristaleria. Employees: 110. Sale, processing and installation of flat glass products and mir- • Gijon Fabril - Spain (100%). Production and distribution of rors. machines and molds for the glass industry. 2003 consolidated sales: €107.3 million. • Rayen Cura Saic - Argentina (60%). Manufactures glass con- Employees (including subsidiaries): 791. tainers (bottles). Plant in Mendoza. Sales: 85.5 million Argentine pesos. Employees: 255. Subsidiaries and holdings • La Veneciana Norte (95%), La Veneciana Levante (95%), La Veneciana Bética (95%), La Veneciana Canarias (95%), La Veneciana iSaint-Gobain Abrasivos (Spain) Balear SA (100%), Cristaleria Industrial (CRISA) (95%), Vidrios de 100%-owned by Saint-Gobain Abrasifs (France). Seguridad Laminados - Vislam - (95%). Produces abrasive grinding wheels. Plants in Pamplona and Montmelo. iSaint-Gobain Vetrotex España 2003 sales: €40.9 million. Employees: 250. 100%-owned by Saint-Gobain Cristaleria. Holds: 100% of Saint-Gobain Abrasivos Lda - Portugal. Distributes Manufactures and sells fiberglass for reinforcements. abrasive products. Plant in Porto. Plant in Alcalá de Henares. 2003 sales: €76.3 million. Employees: 367. iSaint-Gobain Glass Portugal Holds: 100%-owned by Saint-Gobain Cristaleria. • 0.1% of Saint-Gobain Vetrotex International - France. See Saint- Manufactures and processes flat glass for buildings and home Gobain Vetrotex France. appliances. • 100% of CemFil International - United Kingdom. Distribution Plant (float line) in Santa Iria de Azoia (Portugal). of CemFil glass fibers for reinforcing concrete. 100% of Vetrotex 2003 sales: €52 million. Distribucion Norte, Vetrotex CemFil and Saint-Gobain Tevesa - Employees: 154. Spain. Holds: • 40% of Beijing Saint-Gobain Vetrotex Glass Fiber - China. See • SGSP Vidro Automovel - Portugal. See company profile. Saint-Gobain China Invest CY. • 100% of Covipor - CIA Vidreira do Norte, and 100% of Covilis - Portugal. Processing of glass products for the building industry. iSaint-Gobain Canalizacion Total sales: €26.5 million Employees: 167. Owned 80% by Saint-Gobain PAM and 20% by Saint-Gobain Cristaleria. iSGSP Vidro Automovel Ductile cast-iron pipes. 100%-owned by Saint-Gobain Glass Portugal. Plant in Santander. Flat glass processing for the auto industry. 2003 sales: €155.2 million. Plant in Santa Iria de Azoia (Portugal). Employees: 275. 2003 sales: €59.2 million. Holds: PAM Colombia SA - Colombia (95%). See company profile. Employees: 283. Saniplast (100%) - Spain. Distribution of pipes and accessories. Holds: 60% of Autoverlusa - Portugal. Distribution of replace- Sales: €40.4million. Employees: 108. ment flat glass parts for the auto industry.

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iSaint-Gobain Mondego iSaint-Gobain Pipelines Plc 100%-owned by Saint-Gobain Vicasa. 100%-owned by Saint-Gobain Plc. Manufactures glass containers (industrial bottles and jars). Ductile cast-iron pipes and hydraulic connectors for water-sup- Plant in Figueira da Foz (Portugal). ply and wastewater networks. Hydraulic valves. Cast-iron and 2003 sales: €53.8 million. steel supplies for roadworks, cast-iron supplies for the building Employees: 256. industry. Plants in Stanton, Staveley, Holwell, Risca,West Bromwich and Telford. 2003 sales: £150 million. Employees: 1,289. United Kingdom €1 = GBP 0.692 Holds: • Saint-Gobain Pipelines South Africa - South Africa (100%). See company profile. iSaint-Gobain PLC • Foundry Products Ltd - United Kingdom, Guest and Chrimes - United Kingdom (100%). Owned 72.6% by Partidis, 11.4% by Saint-Gobain Glass Benelux, • Stanton Bonna Concrete Ltd - United Kingdom (20%). Concrete 5.8% by Spafi, 4.5% by Saint-Gobain PAM, 4.5% by Halbergerhütte pipes. and 1.2% by Saint-Gobain Isover A/S. Holding company. Holds: iSaint-Gobain Ceramics & Plastics Plc • Solaglas Ltd, Saint-Gobain Pipelines Plc, Saint-Gobain Ceramics & Plastics Plc, Abrasives Plc; Saint-Gobain Building Distribution 100%-owned by Saint-Gobain Plc. Ltd - United Kingdom. See company profiles. Manufactures and sells high-performance plastics and products • Orchardflint - UK. Holding company. for chemical processes. • Saint-Gobain Glass UK Ltd. (100%) - United Kingdom. Float in Plant in Stoke-on-Trent. Egborough. Sales: £57.3 million. Employees: 149. Holds: • Saint-Gobain Pipe Systems Plc - United Kingdom (100%). • Saint-Gobain Quartz Plc - United Kingdom (100%). See com- Distribution of pipe products for the building and public works pany profile. sector. • 100% of Chemfab Holding - Ireland. Processing of coated fabrics • Saint-Gobain Technical Fabrics UK Ltd (100%). Sales: £6.1 mil- (PTFE, silicone) and adhesive tapes. Holds 100% of Tygaflor lion. Employees: 43. Holdings - Ireland, which holds: 100% of Chemfab Luxembourg • Saint-Gobain Insulation UK (100%). Holds 50% of British Gypsum SARL. Holds: 100% of SG PPL Ireland. Sales: _23.4 million. Employees: Isover - United Kingdom. Production and sale of insulation prod- 115. ucts. Sales: £11.4 million. Employees: 143. • Chemfab Holding UK Ltd - United Kingdom (100%). Sales: £6.3 million. Employees: 31. • Saint-Gobain Crystals & Detectors UK Ltd. - United Kingdom iSolaglas Ltd (100%). • Saint-Gobain Industrial Ceramics Ltd - United Kingdom (100%). 100%-owned by Saint-Gobain Plc. Production and sale of high-temperature insulation fiber and Processing and distribution of flat glass products for the build- refractory products. Plant in Rainford. Sales: £7.4 million. Employees: ing industry (tempered glass, laminated glass, mirrors, insulating 77. glass). Network of 42 sites including 27 processing facilities • Saint-Gobain Performance Plastics Corby - United Kingdom throughout the UK. (100%). Manufactures heat-resistant hose, tubing and bundles for 2003 sales (including subsidiaries): £178.2 million. beverage-dispensing applications. Sales: £3.1 million. Employees: Employees (including subsidiaries): 2,306. 37. Holds: • Hayes Group, Dockrell Glass Group - United Kingdom (100%). Processing for the building industry. iSaint-Gobain Quartz Plc • Thermax, Birmingham Build - United Kingdom (100%). Processing for the automobile and building industries . 100%-owned by Saint-Gobain Ceramics & Plastics Plc. • Saint-Gobain Glass Ltd – United Kingdom (100%). UK distribu- Produces silica parts for the chemical industry, fused quartz for tor for the products of the Flat Glass and Containers Divisions. the semi-conductor industry, optical fiber manufacturing, infrared • Vetrotech Saint-Gobain UK (50%). heating and laboratory equipment. Plants in Wallsend. 2003 sales: £12.7 million. iSaint-Gobain Building Distribution Ltd Employees: 195. Holds: 100%-owned by Saint-Gobain Plc. • TSL Quadrant Ltd - United Kingdom (100%). Plant in Harlow. Distribution of building materials. • SG Semicon Services - United Kingdom (100%). Plant in 2003 sales: £1.89 billion. Cumberland. Employees: 12,600. Holds: 100% of Meyer Decorative Surface USA. Distribution of building materials.

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iAbrasives Plc iSaint-Gobain Vetrotex Italia 100%-owned by Saint-Gobain Plc. 100%-owned by International Saint-Gobain. Holds: 100% of Unicorn Abrasives Ltd and Saint-Gobain Abrasives Manufactures and sells fiberglass for reinforcements. Ltd - United Kingdom. Sales: £73.4 million. Employees: 695. Plants in Besana Brianza and Vado Ligure. Through various subsidiaries, manufactures bonded and coat- 2003 sales: €140.3 million. ed abrasives as well as superabrasives. Plants in Stafford, Employees: 525. Gloucester, Tottenham,Welwyn, Leicester, Southampton and Holds: 75.9% of Saint-Gobain Revetex SRL - Italy; 100% of SG LMC Brighton. Holds 100% of SG Universal Abrasives Inc. - USA. Plants - Italy; 13.1% of Saint-Gobain Vetrotex International - France. See in Bristol and Romulus. Sales: $48.7 million. Employees: 232. Saint-Gobain Vetrotex France.

iSaint-Gobain Condotte Spa € Italy 1 = ITL 1,936.3 Owned 90% by Saint-Gobain PAM and 10% by Halbergerhütte. Ductile cast-iron pipes. iSaint-Gobain Glass Italia Plants in Cogoleto, Lavis and Pesaro. 2003 sales: €82.6 million. 100%-owned by Vertec. Employees: 193. Plants in Pisa (processed products for the building industry) and Sesto Fiorentino (silvering workshop). 2003 sales: €139.2 million. iSaint-Gobain Vetri Employees: 329. Owned 100% by Saint-Gobain Emballage. Subsidiaries and holdings Manufactures glass containers (industrial bottles and jars). Plants in Dego, Lonigo,Villa Poma, Pescia, Gazzo Veronese, Carcare. • Saint-Gobain Sekurit Italia - Italy. See company profile. € • Flovetro (50%). Float line at Vasto. 2003 sales: 356.9 million. • Mineraria Apuana (100%). Operation of a dolomite quarry. Employees: 1,162. • Sirsa (49%). Components for the auto industry. Holds: 100% of Silver - Italy. Sand quarry products. 100% of Ecoglass • M.A.C.Trasporti (50%). Road transport. - Italy. Collection and processing of cullet. • Gruppo Fontana (100%). Processing and sale of glass. Sales: € 56.1 million. Employees: 73. iSaint-Gobain Abrasivi Spa (Italy) • Vetreira Industriale Saint-Gobain (V.I.S.) SRL (100%). Employees: 58. 100%-owned by Saint-Gobain Abrasifs (France). Manufactures abrasive grinding wheels. Plants in Corsico (Milan), Caronno (Varese),Turin and Salerno. iSaint-Gobain Sekurit Italia 2003 sales: €88.7 million. 100%-owned by Saint-Gobain Glass Italia. Employees: 450. Flat glass processing for the auto industry. Plant in Savigliano. iSEPR Italia 2003 sales: €70.4 million. Employees: 285. 100%-owned by SEPR. Holds: 100% of Autover Italia SRL, 50% of Borgna Sicurglass SRL and Manufactures fused-cast refractory products. of Vetro Sud SRL - Italy. Plant in Mezzocorona. 2003 sales: €31.1 million. Employees: 221. iSaint-Gobain Isover Italia 92% owned by International Saint-Gobain. Manufactures insulating materials and sealing products (roof- € ing materials, bonded fiberglass sidings). Poland 1 = PLZ 4.398 Plants in Vidalengo and Chieti. € 2003 sales: 59 million. iSaint-Gobain Glass Polska Employees: 250. Holds: 17.9% of Saint-Gobain Isover SA - Switzerland. See com- 100%-owned by Saint-Gobain Glass Deutschland GmbH. pany profile. Manufactures and processes flat glass. Float line in Strzemieszyce. 2003 sales: 302.6 million zloty. Employees: 242. Holds: 100% of Glaspol - Poland. Processing and distribution of flat glass for the building industry. Sales: 133.7 million zloty. Employees: 428. 100% of Hsj Jaroszowiec - Poland. Sales: 79.7 mil- lion zloty. Employees: 349.

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iSaint-Gobain Isover Polska Scandinavia €1 = DKK 7.431 €1 = SEK 9.125 100%-owned by Saint-Gobain Isover AB. €1 = NOK 8.000 Production and distribution of insulating products. €1 = FIM 5.95 2003 sales: 247.2 million zloty. Employees: 246. iSaint-Gobain Glass Nordic A/S S (Denmark) iSaint-Gobain Velimat Polska Sp ZOO Owned 50% by Saint-Gobain Glass Deutschland GmbH and 50% by Saint-Gobain Glass Benelux. 100%-owned by SG Vertex AS. Holding company. Production and distribution of bonded fiberglass. Holds 100% of: 2003 sales: 34.4 million zloty. • Emmaboda Glas AB - Sweden. Produces insulating and tem- Employees: 71. pered glass. Plant in Emmaboda. Sales: SEK 224.3 million. Employees: 244. Holds 100% of Glashuset I Sverige AB - Sweden. Glass distribution. iSaint-Gobain Abrasives Sp ZOO •Scanglas A/S - Denmark. Produces insulating and tempered 100% owned by Saint-Gobain Abrasifs SA (France). glass. Plants in Korsør and Kjellerup. Sales: DKK 244.1 million. Production and distribution of abrasive grinding wheels. Employees: 206. Plant in Kolo. •Brodrene Böckmann A/S - Norway. Produces insulating glass. 2003 sales: 99.4 million zloty. Plants in Frederikstad and Gjövik. Sales: NOK 333.7 million. Employees: 466. Employees: 270. •Scandi-Glass A/S - Norway. Produces insulating glass. Plant in Sem. Sales: NOK 71.7 million. Employees: 44. •SI-Glass A/S - Norway. Produces laminated and tempered glass. Plant in Sauda. Sales: NOK 73.6 million. Employees: 72. Switzerland €1 = CHF 1.521 • Holds also: Scanglas Regionalgruppen A/S - Denmark (100%). Sales:DKK 181.8. Employees:170. Baltiklaas - Estonia (100%), Finnglass iSaint-Gobain Isover SA Oy - Finland (63%),Verinvest Oy - Finland (82.7%). Processing and dis- tribution of flat glass for the building industry. Owned 46.7% by Saint-Gobain Isover G + H AG, 34.1% by International Saint-Gobain and 17.9% by Saint-Gobain Isover Italia. iSaint-Gobain Sekurit Scandinavia AB Production and sale of insulating products. Distribution of fiber (Sweden) reinforcements. Plant in Lucens. 100%-owned by Saint-Gobain Sekurit Deutschland Beteiligungen 2003 sales: CHF 45.8 million. GmbH. Employees: 164. Manufactures tempered and laminated glass for the automo- Holds: 25% of Saint-Gobain Isover AB - Sweden. See company pro- bile industry. file. 49% of Saint-Gobain Eurocoustic - France. See Saint-Gobain Plant in Eslöv. Isover. 2003 sales: SEK 477.8 million. Employees: 265. Holds: 100% of Saint-Gobain Sekurit Eesti A/S - Estonia. Employees: iInternational Saint-Gobain 161. Manufactures replacement windscreens. Owned 96.5% by Compagnie de Saint-Gobain and 3.5% by Valfix. Holding company. iSaint-Gobain Isover AB (Sweden) Holds: Isover SA - Switzerland; Saint-Gobain Isover Italia - Italy; Saint-Gobain Vetrotex Italia - Italy; Saint-Gobain Isover AB - Owned 75% by International Saint-Gobain and 25% by Saint- Sweden; Saint-Gobain Cristaleria - Spain. See company profiles. Gobain Isover SA. 1.9% of Euroventures BV - Netherlands. Production and sale of insulating products. Plants in Billesholm and Vrena. 2003 sales: SEK 814.4 million. Employees: 499. Holds: Saint-Gobain Ecophon AB - Sweden, Saint-Gobain Isover Oy - Finland, Saint-Gobain Isover Polska - Poland. See company pro- files.

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Information on subsidiaries

iSaint-Gobain Ecophon AB (Sweden) North America €1 = USD 1.131 € 100%-owned by Saint-Gobain Isover AB. 1 = CAD 1.582 Production and sale of acoustic ceilings. Plant in Hyllinge. iSaint-Gobain Corporation 2003 sales: SEK 773.8 million. Employees: 441. 100%-owned by Spafi. Holds: 100% of Saint-Gobain Ecophon Production A/S - Denmark. Holds: 100% of Saint-Gobain Delaware Corporation - USA - Holding Manufactures acoustic products. 60% of Ecophon C.T.T - USA. 100% company which controls CertainTeed Corporation, Saint-Gobain of Decoustics - Canada. Sales: CAD 33.3 million. Employees: 218. Containers, Inc., Saint-Gobain Calmar Inc, Saint-Gobain Glass Corporation and Saint-Gobain Abrasives, Inc. - USA. See compa- ny profiles. iSaint-Gobain Isover Oy (Finland) 100%-owned by Saint-Gobain Isover AB. iCertainTeed Corporation Production and distribution of insulating products. Plants in Hyvinkää and Forssa. 100%-owned by Saint-Gobain Delaware Corporation. 2003 sales: €85.4 million. 2003 sales: $2,682 million. Employees: 308. Employees: 8,059. Holds: 100% of Saint-Gobain Isover Esti AS - Estonia; 100% of SIA The sales and the employees of CertainTeed Corporation include Saint-Gobain Isover - Latvia; 100% of UAB Saint-Gobain Isover - those of Saint-Gobain Vetrotex America Inc., Saint-Gobain Lithuania; 99.9% of Zao Isover - Russia. Distribution of insulat- Technical Fabrics America Inc., Saint-Gobain BayForm America ing materials. 100% of SG Isover Holding Oy - Finland which holds Inc., BTI Inc., and CertainTeed Corona, Inc. 64.6% of SG Isover Yegorievsk - Russia. Employees: 113. 100% of Insulation products. Plants in Athens (Georgia), Chowchilla Isover Invest. Oy - Finland which holds 100% of SG Isover Zat - (California), Kansas City (Kansas), Mountaintop (Pennsylvania), Ukraine. Sherman (Texas),Winter Haven (Florida). Building materials.This division includes the following business lines: iSaint-Gobain Isover A/S (Denmark) • Solid vinyl siding and windows. Plants in Corona and West Sacramento (California), Hagerstown (Maryland), McPherson 100%-owned by Saint-Gobain Isover G + H AG. (Kansas), Jackson (Michigan), Lebanon (Indiana), Social Circle Production and sale of insulating products. (Georgia), Auburn (Washington), Richmond (Virginia). Plant in Vamdrup. •Residential roofing (shingles). Plants in Birmingham (Alabama), 2003 sales: DKK 356.9 million. Fremont and Wilmington (California), Oxford (North Carolina), Employees: 202. Peachtree City (Georgia), Shreveport (Louisiana), Norwood Holds: 1.2% of Saint-Gobain Plc - United Kingdom. See company (Massachussets), Shakopee (Minnesota), Milan (Ohio), Portland profile. 100% of Glasuld Ireland. 100% of Glasuld Norge A/S - (Oregon), Ennis (Texas). Norway. Production and distribution of insulating products. •Commercial roofing. Plants at Chester (Pennsylvania) and Little Rock (Arkansas). iSaint-Gobain Ceramic Materials A/S •Roofing granules. Plants in Gads Hill (Missouri), Glenwood (Norway) (Arkansas), Norwood (Massachusetts). •Polymers. Plant in Lake Charles (Louisiana). 100%-owned by SEPR. •PVC pipe and outdoor living products (fencing, decking and Manufactures and sells silicon carbide products. railing). Plants in Lodi (California). McPherson (Kansas), Waco Plants in Lillesand and Arendal. (Texas), Social Circle (Georgia), Buffalo (New York), Romeoville 2003 sales: NOK 405.4 million. (Illinois). Employees: 271. •Fiber cement siding. Plants in White City (Oregon), Roaring River Holds: (North Carolina). • Saint-Gobain Matériaux Céramiques Benelux SA (100%) - Subsidiaries and holdings Belgium. Processing of silicon carbide and corundum for the refractory and abrasives industries. Plant in Hody. Sales: €18.3 •Saint-Gobain Vetrotex America, Inc. - USA (100%). Manufactures million. Employees: 30. and sells fiberglass for reinforcements. Plant in Wichita Falls •Saint-Gobain Materiales Ceramicos (100%) - Venezuela. Produces (Texas). silicon carbide.Sales: €17.9 million. Employees: 27. • Saint-Gobain Technical Fabrics America, Inc. - USA (100%). •SG Ceramic Mat. Lianyungang (50%+50% by SG China Invest) Production and sale of industrial products for reinforcements. - China. Plants in Albion (New York), Brunswick (Maine), Charleston and Ridgeway (South Carolina), Dover (Ohio), Greensboro, (North Carolina), Lakewood (Washington), Russellville (Alabama),Wichita Falls (Texas). Holds: 100% of Saint-Gobain BTI Inc - USA. Holds 100% of Saint-Gobain BayForm America, Inc. - USA. Production and sale of industrial products and parts for door and window manufacturing. Plants in Cadiz (Ohio), Des Moines (Iowa), Merrill (Wisconsin). •Ecophon C.T.T - USA (40%). Sale of acoustic ceilings. •Bird Inc. - USA (100%). Manufactures shingles and roofing gran- ules. Holds 100% of GS Roofing Products Company Inc. •CertainTeed Corona, Inc - USA (100%).

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iSaint-Gobain Abrasives, Inc. iSaint-Gobain Containers, Inc. Owned 100% by Saint-Gobain Delaware Corporation. 100%-owned by Saint-Gobain Delaware Corporation. 2003 sales: $596.1 million. Manufactures glass containers (bottles and jars). Employees: 3,494. Plants in El Monte, Maywood and Madera (California), Henderson Manufactures bonded abrasives, coated abrasives and superabra- and Wilson (North Carolina), Dolton and Lincoln (Illinois), Dunkirk sives. Main plants:Worcester (Massachusetts); Littleton (New (Indiana), Ruston (Louisiana), Milford (Massachusetts), Pevely Hampshire); Livingston (New Jersey), Glenmont and Troy (New (Missouri), Carteret (New Jersey), Sapulpa (Oklahoma), Port York); Arden and Greensboro (North Carolina), Brownsville and Allegany (Pennsylvania),Waxahachie (Texas), Seattle (Washington), Stephensville (Texas), Fullerton and Ontario (California), Hot Burlington (Wisconsin). Springs (Arkansas), Bensenville (Illinois), Romulus (Michigan), 2003 sales: $1,444.5 million. Hamilton and Plattsville (Ontario),Travelers Rest (South Carolina). Employees: 5,335. Main subsidiaries in the U. S., Canada, Mexico, New Zealand. Also Holds:Tropicana Industrial Glass - USA (50%). Manufactures glass holds: Saint-Gobain Ceramics & Plastics, Inc. Grindwell Norton - containers (bottles). India; Saint-Gobain KK – Japan (through Norton Foreign Affiliates). See company profiles. Also holds Saint-Gobain Abrasivos de Mexico - Mexico (100%). iSaint-Gobain Calmar, Inc. Manufactures non-woven abrasives and grinding wheels. Plant 100%-owned by Saint-Gobain Delaware Corporation. in Reynosa. Manufactures plastic pumps. Plants in City of Industry (California), Lee’s Summit (Missouri), iSaint-Gobain Ceramics & Plastics, Inc. Washington Court House (Ohio) and Winfield (Kansas). 2003 sales: $195.3 million. 100%-owned by Saint-Gobain Abrasives Inc. Employees: 1,157. Through its own activities or through its subsidiaries, manufac- Holds: tures engineered and advanced ceramics, chemical process prod- • SG Calmar Wuxi Dispensing Systems Ltd.- China (100%). ucts, high-performance plastics, fused-cast refractory products and Assembly of plastic pumps. Plant in Wuxi. special ceramic grains and silicon carbide products. Main plants •Saint-Gobain Calmar Argentina - Argentina (99%), Saint-Gobain in Worcester, Northampton and Taunton (Massachusetts),Wayne, Calmar SA de CV (99%) – Mexico, Saint-Gobain Calmar Canada Ltd. Bridgewater and Mickelton (New Jersey), Amherst, Niagara Falls, - Canada (100%). Distribution companies. Sanborn, Granville, Hoosick Falls, and Poestenkill (New York), Akron, Aurora, Stow Ravenna, Newbury, Mantua, Springboro and Solon (Ohio), Louisville (Kentucky), Buckhannon (West Virginia), iSaint-Gobain Technical Fabrics Canada, Ltd Olyphant, Latrobe and Malvern (Pennsylvania), Boca Raton (Florida), 100%-owned by Spafi. Bristol (Rhode Island), Austin, Bryan, Irving and Houston (Texas), Plants in Midland. Bryant and Fort Smith (Arizona), Colorado Springs (Colorado), 2003 sales: CAD 65.4 million Soddy-Daisy (Tennessee), East Granby (Connecticut), Elk Grove Employees: 201. and Mundelein (Illinois), Anaheim, Fremont, Milpitas, San Jose Holds: and Garden Grove (California), Huntsville (Alabama), Merrimack •100% of Saint-Gobain BayForm Canada. Production and sale of and Milford (New Hampshire), Portage (Wisconsin), Seattle and industrial products and parts for door and window manufac- Washougal (Washington), Albuquerque (New Mexico), West turing. Plants in Toronto and Midland (Ontario), Calgary (Alberta), Jordan (Utah), Scarborough (Maine), Beaverton (Michigan), Paris, St. Apollinaire (Quebec). Sales: CAD 31.3 million. Employees: 23 Brantford and Niagara Falls (Ontario, Canada), Chandler (Arizona), • 100% of Saint-Gobain Technical Fabrics SA de CV - Mexico. Mundelein (Illinois). Produces insect screens. Plant in Tlaxcala. Sales: 195.6 million 2003 sales: $1,256.8 million. Mexican pesos. Employees: 156. Employees: 6,050. •6.7% of Saint-Gobain Vetrotex International. See Saint-Gobain These figures include consolidated subsidiaries. Vetrotex France.

iSaint-Gobain Glass Corporation 100%-owned by Saint-Gobain Delaware Corporation. Brazil €1 = BRL 3.474 Holds: 100% of HCS Corporation. Plant in Kent (Washington). Saint-Gobain Sekurit USA, Inc. Plants in Lansing and Shelby Township (Michigan). Saint-Gobain Sully, N.A., Inc. Plant in iSão Lourenço Trumbauersville (Pennsylvania). Sovis North America, Inc. Plant in 100%-owned by Compagnie de Saint-Gobain. Madison (Georgia). Vetrotech Saint-Gobain North America, Inc. Holding company. Holds: 44.7% of Saint-Gobain Vidros SA. Plant in Auburn (Washington).

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Information on subsidiaries

iSaint-Gobain Vidros SA iSaint-Gobain Canalização Owned 54.5% by Compagnie de Saint-Gobain, 44.7% by São Owned 90.5% by Saint-Gobain PAM and 9.5% by Santa Claudia. Lourenço and 0.8% by Santa Claudia. Manufactures ductile cast-iron pipes and connectors. Manufactures and processes flat glass for the auto and build- Plant in Barra Mansa (Rio de Janeiro). ing industries, glass containers (bottles, flasks, industrial jars), 2003 sales: BRL 341.9 million. household glassware, glass fiber insulation and glass fibers for Employees: 1,312 reinforcement. Plants in Mauá, Agus Branca, Campo Bom and Canoas. 2003 sales: BRL 919.4 million. iSaint-Gobain Abrasivos Ltda Employees: 3,005. 100%-owned by Spafi. Subsidiaries and holdings Manufactures bonded and coated abrasives. •Cebrace - Brazil. See company profile. Plants in Caieiras, Caldas, Guarulhos, Lorena, Igarassu, Paulista, • Saint-Gobain Isover Argentina - Argentina (100%). Produces Vinhedo and Jundiai. fiberglass for insulation and reinforcements. Plant in Llavallol. 2003 sales: BRL 304.8 million. Sales: 18.9 million Argentine pesos. Employees: 90. Employees: 1,221. • Santa Marina Vitrage Ltda - Brazil (100%). Sales: BRL 29.5 mil- Holds: 100% of Saint-Gobain Abrasivos Argentina - Argentina. lion. Employees: 126. Production and distribution of bonded abrasives. Plant in Campana. Employees: 32.

iCebrace 50% owned by Saint-Gobain Vidros SA. Mexico €1 = MXN 12.216 Manufacturing and processing of flat glass. € Float-glass plants in Jacarei and Caçapava. Colombia 1 = COP 3,252.2 2003 sales: BRL 527.1 million. Employees: 634. iSaint-Gobain Glass Mexico 100% owned by Saint-Gobain Cristaleria. iBrasilit Float line in Cuautlá. Owned 100% by SGPPI. 2003 sales: 936.4 million Mexican pesos. Manufactures fiber-cement sheets and moldings. Employees: 304. Plants in Esteio (Rio Grande do Sul), Caxanga (Pernambuco) and Holds: Saint-Gobain Sekurit Mexico - Mexico. See company pro- Belém (Para). file. 2003 sales: BRL 114.9 million. Employees: 559. iSaint-Gobain Sekurit Mexico Subsidiaries and holdings 8.5% owned by Saint-Gobain Cristaleria and 91.5% by Saint-Gobain •Eterbras, - Brazil. See company profile. Glass Mexico. • Santa Veronica (100%). Holds Carborundum Holding (100%) Manufactures flat glass products for the auto industry. which holds Saint-Gobain Cerâmicas & Plásticos (100%). Plant in Cuautlá. Manufactures and sells high-temperature insulation fibers and 2003 sales: 805.2 million Mexican pesos. refractory products. Plant in Vinhedo. Sales: BRL 131.2 million. Employees: 717. Employees: 380. Holds 50% of Jundu - Brazil. Operates quarries. Employees: 277. •São Juliano (25% + 50% held by Santa Veronica and 25% by Saint- iSaint-Gobain Vetrotex America (Mexico) Gobain Ceramic Materials AS). Holds 100% of Saint-Gobain Materiais Cerâmicos - Brazil. Produces silicon carbide. Plant in 55.6% owned by Saint-Gobain Cristaleria and 44.4% by Saint- Barbacena (Minas Gerais). Sales: BRL 104.2 million. Employees: Gobain Vetrotex España. 347. Manufactures and sells fiberglass reinforcements. •Saint-Gobain Quartzolit (35% + 15% held by Santa Veronica and Plant in Xicohténcatl. 50% by Saint-Gobain Weber). See Saint-Gobain Weber. 2003 sales: 412.4 million Mexican pesos. Employees: 341. iEterbras iSaint-Gobain de Colombia 80% owned by Brasilit. Manufactures fiber-cement sheets and moldings. Owned 28.5% by Compagnie de Saint-Gobain, 49.4% by Saint- Plants in Capivari (São Paulo), Guadalupe (Rio de Janeiro) and Gobain Cristaleria and 17.1% by Cristaleria Andina. Goiãnia (Goiás). Manufactures flat glass for the automobile and building indus- 2003 sales: BRL 116.4 million. tries. Employees: 414. Plants in Barranquilla and Usinme. 2003 sales: 53.2 billion Colombian pesos. Employees: 209.

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iPAM Colombia SA iSaint-Gobain Vetrotex Korea Ltd Owned 95% by Saint-Gobain Canalización and 5% by Saint-Gobain 98.6% owned by Saint-Gobain Vetrotex International. Cristaleria. Manufactures and sells fiberglass for reinforcements. Manufactures water supply pipes. Plant in Kunsan (South Korea). 2003 sales: 41.6 billion Colombian pesos. 2003 sales: 94.3 billion won. Employees: 141. Employees: 401.

iSaint-Gobain China Invest CY € Japan 1 = JPY 131 100%-owned by SGPPI. Holding company. iSaint-Gobain K.K. Holds: •Saint-Gobain Isover Beijing - China (29.5% and 29.5% by Saint- 100%-owned by Norton Foreign Affiliates. Gobain Isover). Glasswool insulation products. Sales: 60.7 mil- Produces superabrasives, technical ceramics, high-performance lion yuan. Employees: 155. plastics. •Zhanjiang Saint-Hua-Glass - China (35% and 35% by Saint- Plants in Chiba, Suwa and Seto. Gobain Oberland AG). Manufactures glass containers (bottles). 2003 sales: 6.8 billion yen. Sales: 106.4 million yuan. Employees: 390. Employees: 182. •Beijing Saint-Gobain Vetrotex Glass Fiber - China (40% and 40% by Saint-Gobain Vetrotex España). Fiberglass for reinforcements. Sales: 50.8 million yuan. Employees: 135. iNSG Vetrotex K.K. •Saint-Gobain Abrasives Shangai - China (32% and 68% by Saint- Gobain Abrasifs France). Produces abrasive grinding wheels. 100% owned by Saint-Gobain Vetrotex International. Plants in Shangai. Sales: 199.8 million yuan. Employees: 421. Manufactures and sells fiberglass for reinforcements. • Beijing SEPR Refractories Co.- China (22% and 65.9% by SEPR). Plant in Tsu (Mie Prefecture). Manufactures fused-cast refractory products. Plant in Beijing. 2003 sales: 8.9 billion yen. Sales: 71.7 million yuan. Employees: 190. Employees: 226. •Saint-Gobain Pipelines Co Ltd - China (28.4% and 71.6% by Saint- Holds: Gobain PAM). Ductile cast iron pipes. Plant in Manshaan. Sales: •GRP Co., Ltd (100%). Distributes products for the reinforced plas- 253.2 million yuan. Employees: 468. tics industry. Sales: 4 billion yen. Employees: 17. •Mie Textiles Co., Ltd (100%). Glass weaving. Sales: 0.7 billion yen. Employees: 31. iGrindwell Norton Ltd (India) 26.8% owned by Saint-Gobain Abrasives Inc. and 24.6% by SGPPI. Manufactures and sells abrasives and ceramics. € Other 1 = KRW 1,347 Plants in Bangalore, Bombay, Nagpur and Tirupaty. countries €1 = CNY 9.36 2003 sales: 2.3 billion Indian rupees. €1 = INR 52.6 Employees: 1,315. €1 = ZAR 8.53 iSaint-Gobain Pipelines South Africa i Hankuk Glass Industries Inc. (South Korea) 100%-owned by Saint-Gobain Pipelines Plc. 43.8% owned by Sofiag. Manufactures cast-iron parts. Float-glass line producing flat glass. Two plants in Pretoria (South Africa). Plants in Kunsan and Busan. 2003 sales: 144.9 million rand. 2003 sales: 127.9 billion won. Employees: 450. Employees: 834. Holds: i • Hankuk Sekurit Limited - South Korea (50%, plus 25% held by Saint-Gobain Abrasives Pty SGPPI and 25% by Saint-Gobain Sekurit Deutschland Beteiligungen 100%-owned by Saint-Gobain Abrasifs France. GmbH). Flat glass processing for the auto industry. Plants in Kajwa Manufactures coated abrasives, superabrasives and grinding (Incheon), Iksan and Kunsan. Sales: 197.6 billion won. Employees: wheels. 724. Plants in Isando and Port Elisabeth (South Africa). • Hankuk Processed Glass Inc. (100%), Hankuk Lighting Glass 2003 sales: 126.6 million rand. (100%), Hankuk Haniso (100%), Hankuk Specialty Glass (60%). Employees: 192. Total sales: 45.9 billion won. Employees: 637. •Nanjing Saint-Gobain Hanglas Co - China (36.8% and 36.8% by Sofiag). Plant in Nankin. Sales: 107.6 million yuan. Employees: 638.

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VI• Person responsible for the “Document de Référence” and statutory auditors

Person responsible Statutory Auditors

for the “Document de Référence” The Statutory Auditors of the Company are: Person responsible for the “Document de Référence” •PricewaterhouseCoopers Audit, 32 rue Guersant, 75017 Paris, France, represented by Pierre Coll and Christian Marcellin, reap- Jean-Louis Beffa, Chairman and Chief Executive Officer. pointed on June 25, 1998 for a term of six years expiring at the close of the 2004 Annual General Meeting; •La Société d'Expertise Comptable Economique et Financière iStatement by the person responsible (SECEF), 3 rue de Turique, 54000 Nancy, France represented by for the “Document de Référence” Jacques Tenette and Francis Vallet, reappointed on June 29, 2000 for a term of six years expiring at the 2006 Annual To the best of my knowledge, the information contained in the General Meeting. After consultation with the Company’s “Document de Référence” is correct and includes all the infor- General Management, SECEF has resigned from its position as mation required by investors to form an opinion on the assets, Statutory Auditor, effective from the Annual General Meeting operations, financial position, results and outlook of the issuer. of June 10, 2004. No information has been omitted that would be likely to alter an investor’s opinion. iStatement by the Statutory Auditors Paris, April 19, 2004 As required by law, page 55 of the “Document de Référence” includes the Report of the Statutory Auditors – prepared in accordance with the final paragraph of article L.225-335 of the Commercial Code – relating to the Report of the Chairman of the Board of Directors which describes the internal control procedures implemented by Compagnie de Saint-Gobain. Chairman and Chief Executive Officer In our capacity as Statutory Auditors of Compagnie de Saint- Jean-Louis Beffa Gobain (the Company) and as required by Commission des Opérations de Bourse regulation COB 98-01, we have examined in accordance with French professional standards, the infor- mation about the financial position and the historical accounts included in the “Document de Référence”. The “Document de Référence” is the responsibility of the Chairman of the Board of Directors of the Company. Our responsibility is to express an opinion on the fairness of the information about the financial position and the accounts contained in the “Document de Référence”. Our procedures, which were performed in accordance with French professional standards, consisted of assessing the fair- ness of the information about the financial position and the accounts and verifying that this information agrees with the audited financial statements, reading the other information contained in the “Document de Référence” in order to identify any material inconsistencies with the information about the financial position and the accounts, and reporting any mani- festly incorrect information that came to our attention, based on our overall knowledge of the Company, as acquired during our audit. The “Document de Référence” does not contain any forward looking information determined in accordance with a structured process. We audited in accordance with French generally accepted auditing standards the financial statements of the Company and the Group for the years ended December 31, 2001, 2002 and 2003 prepared in accordance with French generally accepted accounting principles and regulations, as approved by the Board of Directors. Our reports on these financial statements were free of qualifications or observations.

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In accordance with the requirements of article L. 225-235 of the the approach used by the Group and – based on the informa- Commercial Code relating to the justification of our assess- tion available at the time of our review – we also ensured that ments, introduced by the Financial Security Act (Loi de Sécurité the estimates made by the Group at December 31, 2003 were Financière) of August 1, 2003 and which came into effect for the reasonable. first time for the year ended December 31, 2003, we drew share- The Group records provisions for pensions and other post- holders’ attention to the following matters in our reports on retirement benefits in accordance with the accounting princi- the financial statements of the Company and the Group: ples described in Note 1 to the consolidated financial statements. Such provisions are calculated based on the Company financial statements assumptions and methods described in Note 16. As part of our The Company carries out impairment tests on a yearly basis for assessments, we ensured that the assumptions and methods financial investments and investments in subsidiaries and affil- used for determining these provisions, as well as the resulting iates. Based on the information available at the time of our valuations, were reasonable. audit, we assessed the approach used by the Company – as The types of provisions for contingencies and charges recorded described in Note 1 to the financial statements – and we under “Other liabilities” are described in Note 18 to the consoli- ensured that the estimates made by the Company at dated financial statements. Based on the information available December 31, 2003 were reasonable. at the time of our audit, we ensured that the methods used to As described in Notes 1 and 11 to the financial statements, the determine provisions for contingencies and charges, as well as Company records a provision for potential tax liabilities for tax the disclosures relating to said provisions provided in the Notes which it may be required to pay in the future due to the world- to the consolidated financial statements at December 31, 2003, wide consolidated tax regime and the French integrated tax were reasonable. system. Based on the information available at the time of our These assessments were made in the context of our audit of audit, we ensured that the methods used to determine the the financial statements of the Company and the Group, taken provision for potential tax liabilities, as well as the disclosures as a whole, and therefore contributed to the formation of the relating to said provision provided in the Notes to the financial unqualified opinions expressed in the first part of our reports. statements, were reasonable. Based on the procedures described above, we have nothing to Consolidated financial statements report with respect to the fairness of the information about the financial position and the historic financial statements As stated in Note 1 to the consolidated financial statements, the contained in the “Document de Référence”. Group carries out impairment tests on a regular basis for non- current assets. As part of our assessment of the significant esti- mates used to prepare the financial statements, we examined Paris, April 19, 2004

The Statutory Auditors

PricewaterhouseCoopers Audit SECEF

Pierre Coll Christian Marcellin Jacques Tenette Francis Vallet

This is a free translation into English of the statutory auditors’statement issued in the French language and is provided salely for the convenience of English speaking readers. It should be read in conjunction with and construed in accordance with French law and professional auditing stan- dards applicable in France.

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VII• Checklist

A document filed as a “Document de Référence” in France must include certain information.The table below provides details of the pages of the Annual Report on which said information can be found.

Annual report Pages

iStatement by the person responsible for the “Document de Référence” and the statutory auditors •Statement by the person responsible for the “document de référence” 182 •Statement by the Statutory Auditors 182 •Information policy 20

iGeneral information General information about the capital •Specific issues 16 •Authorized, unissued capital 16 •Potential capital 15 • Changes in capital 16 Market for the company’s shares •Share price and trading volume data over 18 months 12 •Dividends 11

iCapital and voting rights •Current ownership structure 15 •Changes in ownership structure 15 •Shareholders’ agreements 15

iThe Group’s operations •Organization 5 •Key figures 6 • Segment information 140 •The issuer’s markets and competitive position 8 to 10 • Capital spending policy 4 and 5 •Performance indicators 6

iGroup risk analysis • Risk factors - Market risks 99 - Specific risks related to the Group’s operations 100 - Legal risks 101 - Industrial and environmental risks 100 • Insurance and risk coverage 102

iAssets and liabilities, financial position and results •Consolidated financial statements and notes 106 •Off-balance sheet commitments 136 Fees paid to the Statutory Auditors and members of their networks 167 •Pro forma financial disclosures NA • Parent company financial statements and notes 146

iCorporate governance •Membership and operation of management bodies 21 to 32 •Composition and operation of Board Committees 26 to 29 • Directors’ compensation and stock option programs 29 and 30 •Options granted to and exercised by the ten employees (non-director) with the highest number of options 19 • Regulated agreements 41

iRecent developments and outlook •Recent developments 164 •Outlook 164

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Ordinary and Extraordinary General Meeting of June 10, 2004

iReport iAuthorization to buy back The Board of Directors is inviting shareholders to vote fourteen and resell Saint-Gobain shares resolutions governed by the quorum and majority voting rules The purpose of the 5th resolution is to authorize the Board of applicable to Ordinary General Meetings (resolutions 1 to 14) Directors to buy back and possibly resell Saint-Gobain shares. and two resolutions governed by the quorum and majority The maximum purchase price under this authorization is set at voting rules applicable to Extraordinary General Meetings €55 per share and the minimum sale price at €23 per share. (resolutions 15 and 16). This authorization is intended to enable Compagnie de Saint- Gobain to continue to take advantage of the flexibility allowed by the legal provisions relating to the buy back and resale of its iFinancial statements of the company own shares, including: in connection with the grant or exercise and the group - dividend of stock purchase options, to allocate shares to employees, to buy and sell the Company’s shares (including while a public The financial statements of the Company and the Group are tender offer is in progress) to take advantage of market situa- presented in the 2003 Annual Report. tions, to stabilize the share price by trading against the trend, to Shareholders are invited to approve the financial statements of cancel the shares subject to authorization by an Extraordinary the Company (1st resolution) and the Group (2nd resolution) Meeting (as provided in the fifteenth resolution of the Ordinary for the year ended December 31, 2003. and Extraordinary General Meeting held on June 5, 2003), to A description of the Company’s and Group’s financial position hold the shares in treasury stock or transfer them in any way, at December 31, 2003 and their business and results for the year including in exchange for shares, or to manage the Company’s then ended, as well as the information required by applicable cash position or equity.The shares bought back may not exceed legislation and regulations are also included in the 2003 10% of the Company’s capital stock. In view of the treasury Annual Report, to which we would ask you to refer. shares held by the Company, the maximum theoretical purchase price for share buy backs would be €1,626,733,350, € Appropriation of net income corresponding to 29,576,970 shares acquired at a price of 55 each. € Net income for Compagnie de Saint-Gobain came to 513,574 The authorization given last year to buy back the Company’s € thousand in 2003, versus 595,916 thousand in 2002. shares has been implemented as explained on page ??? of the € Total distributable income amounts to 1,603,938 thousand. 2003 Annual Report. Total distributable income amounts to €1,603,938 thousand. This figure includes €1,090,363 thousand in retained earnings brought over from prior years, which takes into account the iRenewal of the terms of office €370 thousand adjustment to the 2002 dividend relating to the 336,000 treasury shares acquired and the 8,300 treasury of four directors – shares sold between the Board Meeting held to approve the election of a new director accounts on March 23, 2003 and the dividend payment date of At its meeting of March 25, 2004, the Board of Directors June 23, 2003. approved the recommendation of the Appointments In the 3rd resolution shareholders are invited to: Committee to renew the terms of office of the following four € • appropriate 290,391 thousand to the special long-term directors whose terms expire at the end of this meeting: capital gains reserve; • Jean-Louis Beffa, Chairman and Chief Executive Officer of € •carry forward 926,575 thousand as retained earnings; Compagnie de Saint-Gobain (6th resolution), • appropriate for distribution to shareholders a total of • Isabelle Bouillot (7th resolution), € 386,972,080.15 corresponding to a net dividend per share of • Sylvia Jay (8th resolution), € 1.15 which, including the 50% avoir fiscal tax credit of _0.575 • José Luis Leal Maldonado (9th resolution). (where applicable), represents total dividend income per share These directors will be given new four-year terms of office, € of 1.725. expiring at the Annual General Meeting held in 2008. € € The 2003 net dividend of 1.15 (up from 1.13 for 2002) will be Shareholders are invited to approve the renewal of the terms of payable in cash from June 24, 2004 on all outstanding shares in office for these four directors. circulation at that date. •Jean-Louis Beffa, 62, is Chairman and Chief Executive Officer of Compagnie de Saint-Gobain. He graduated from the Ecole Poly- i technique, the Ecole Nationale Supérieure du Pétrole and the Regulated agreements Institut d’Etudes Politiques de Paris. He also holds the title of No new agreements governed by articles L-225-38 et seq. of “Ingénieur en chef des Mines”.After starting his career at the Oil the Commercial Code were entered into during the year Division of the French Ministry of Industry, Jean-Louis Beffa (4th resolution). joined the Saint-Gobain Group in 1974 as Vice President Corpo- rate Planning. In 1978 he was appointed Chief Executive Officer of Pont-à-Mousson before going on to become Chairman of that company and President of the Group’s Pipe and Mechanics Division in 1979. He joined the Group’s General Management

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team in 1982 and was appointed Chairman and Chief Executive Cordiale Scholarships Scheme, and a member of the Council of Officer of Saint-Gobain in January 1986. His term of office as Food from Britain and the Franco-British Council. Sylvia Jay director was renewed for six years in June 1992 and again in owns 800 Saint-Gobain shares. June 1998. She was elected as a director of Compagnie de Saint-Gobain in In July 2002, in accordance with the Loi sur les nouvelles regu- June 2001. lations économiques, the Board of Directors decided that he •José Luis Leal Maldonado, 64, is a Spanish citizen. He has a law should continue to be responsible for the general management degree from the University of Madrid and a Political Sciences of Compagnie de Saint-Gobain and therefore retain the title of degree from the University of Geneva. He also has a degree in Chairman and Chief Executive Officer. Statistics and a doctorate in economics from the University of Jean-Louis Beffa is also Vice-Chairman of the Board of Directors Paris. After lecturing at the University of Nanterre for five years, of BNP Paribas, a director of the Bruxelles Lambert Group, a he went on to work at the OECD for a further five-year period. member of the Supervisory Board of Le Monde S.A. and Société In September 1977 he was appointed as Director General for Editrice du Monde S.A., President of Claude Bernard Participa- economic policy in Spain, a post he held until February 1978 tions SAS and a member of the Supervisory Board of Le Monde when he became Secretary of State for economic co-ordination Partenaires SAS. Within the Saint-Gobain Group, he is the and planning. In April 1979 he was appointed as Spain’s Company’s permanent representative on the Board of Saint- Minister of the Economy, a position he held until September Gobain PAM, a director of Saint-Gobain Cristaleria and Saint- 1980. Gobain Corporation, and joint Chairman of the corporate Between 1981 and 1990 José Luis Leal Maldonado acted as an foundation, Saint-Gobain Center for Economic Research. He is economic advisor for Banco de Vizcaya and held the position of also Vice-Chairman of the Supervisory Board of the Pension Vice Chairman at Banco Bilbao Vizcaya. He is currently Reserve Fund. Jean-Louis Beffa owns 210,000 Saint-Gobain Chairman of the Spanish Banking Association. shares. He is a director of Saint-Gobain Cristaleria, a Spain-based •Isabelle Bouillot, 55, is a member of the Supervisory Board of Group subsidiary, and of CEPSA, Renault (Spain) and Alcatel Accor and a director of La Poste. She holds a degree in public law (Spain). He is also the Chairman of “Dialogo”, an association to and graduated from the Institut d'Etudes Politiques de Paris and promote Franco-Spanish amity, and of Accion Contra el Hambre. the Ecole Nationale d'Administration. She started her public He is Vice-Chairman of Fundacion Abril Martorell and a career within the French Budget Department before being member of Real Patronato del Museo del Prado and Fundacion appointed Cabinet Director for the Employment Minister in Duques de Soria. José Luis Leal Maldonado owns 4,000 Saint- 1982 and going on to work as Deputy Cabinet Director for the Gobain shares. Economy and Finance Minister between 1983 and 1984. She He was elected as a director of Compagnie de Saint-Gobain in then held the post of Chairman at l'Union des Banques à Paris June 1998. between 1985 and 1986 before becoming a Government Repre- sentative for the Department for the Control of Financial Oper- •At its meeting of March 25, 2004, the Board of Directors also ations between 1986 and 1989 (Mission de contrôle des activités approved the recommendation of the Appointments financiers). She was an economic advisor to the French Presi- Committee to nominate for election Gianpaolo Caccini as a dent between 1989 and 1991 and then the Budget Director of director, to replace Eric d’Hautefeuille, who passed away on the Economy and Finance Ministry from 1991 to 1995. In June January 17, 2004. 1995, she joined Caisse des Dépôts et Consignations as Deputy Subject to shareholder approval, his term of office will corre- Chief Operating Officer where she was responsible for spond to the remainder of Mr d’Hautefeuille’s term, expiring at managing banking and finance activities. She went on to the close of the Annual General Meeting to be called in 2005. become Chairman of the Management Board of CDC Finance- Shareholders are invited to elect Mr. Caccini in the 10th resolu- CDC Ixis, before standing down from the position in the second tion. half of 2003. She has also resigned from her positions as •Gianpaolo Caccini was born in 1938 and is an Italian citizen. He Chairman, member of the Supervisory Board or permanent has a doctorate in Chemistry from the University of Pavia in representative on the Board of Directors or Supervisory Board Italy. He joined the Saint-Gobain Group in 1973 as Sales Director which she held in various subsidiaries and affiliates of CNCE for the Insulation Division of the Italian subsidiary, Balzaretti and CDC Finance - CDC Ixis within the Caisse des Dépôts Group. Modigliani. He was appointed as Director of the Sealings Divi- She owns 1,200 Saint-Gobain shares. sion of that company in 1980, before going on to become Chief Isabelle Bouillot was a member of the Financial Markets Executive Officer of Vetrotex Italia in 1983 and a director of Council from 1997 until October 2003. Vitrofil in 1986 (two companies within the Group’s Reinforce- She owns 1,200 Saint-Gobain shares. ments Division). He was then appointed Chairman and Chief Isabelle Bouillot was elected as a director of Compagnie de Executive Officer of Saint-Gobain Desjonquères (Containers Saint-Gobain in June 1998. Division) in 1988, President of the Insulation Division in 1991 •Sylvia Jay, 57, is a British citizen and is the Director General of and also of the Reinforcements Division in 1993. In 1996 he the British Food and Drink Federation. became Senior Vice-President of Compagnie de Saint-Gobain She has previously held several positions as a senior British civil and General Delegate for North America.Then in 2000, he went servant, in the Overseas Development Administration (ODA) on to become Chief Operating Officer of Compagnie de Saint- and in secondment to the French Ministry of International Gobain, a position he held until his retirement on April 1, 2004 Cooperation, the French Treasury and the European Bank for Gianpaolo Caccini is also a director of Nexans and JM Huber Reconstruction and Development (EBRD). Corporation (United States) and Chairman of the Italian Asso- Sylvia Jay is also a director of Carrefour. She is a lay member of ciation of Glass Manufacturers. the Procedures and Disciplinary Committee of the General Gianpaolo Caccini is also a director of Nexans and JM Huber Council to the Bar, Industrial Governor of the British Nutrition Corporation (United States) and Chairman of the Italian Foundation, trustee of the Pilgrim Trust and the Entente Association of Glass Manufacturers. He owns 4,820 Saint-Gobain shares.

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iRenewal of one titular statutory auditor’s Please find hereafter additional information required by law. term of office, appointment of second titular statutory auditor, and appointment Employee stock ownership of two substitute statutory auditors At December 31, 2003, 7.4% of the Company’s capital and 11.7% At its meeting of March 25, 2004 the Board of Directors of the voting rights were held collectively by employees under approved the recommendation of the Financial Statements the Group Savings Plan. Saint-Gobain employee shareholders Committee to renew the term of office as titular statutory are represented on the Board of Directors by Pierre Kerhuel, a auditor of PricewaterhouseCoopers Audit, 32 rue Guersant, director who was elected by the Ordinary and Extraordinary F-75017 Paris, (11th resolution), which is due to expire at the General Meeting of June 5, 2003, in accordance with paragraph close of this meeting. In addition, having noted the resignation 3 of article 9 of the Company’s bylaws. of S.E.C.E.F from its position as titular statutory auditor on November 3, 2003 – effective from the date of this meeting – the Board of Directors also approved the recommendation to Remuneration of corporate officers appoint as titular statutory auditor KPMG Audit, Department Information required under article L-225-102-1 of the French of KPMG S.A., 1 cours Valmy, F-92923 Paris La Défense Cedex Commercial Code is provided on pages 29 and 30 of the 2003 (12th resolution). Annual Report. The Board also approved the recommendation to appoint Yves Nicolas, 32 rue Guersant, F-75017 Paris, as substitute statutory auditor (13th resolution) to replace Daniel Chauveau whose Terms of office and functions of directors term of office expires at the close of this meeting. The Board of Directors also noted that Pierre-Henri Scacchi & Information required under article L-225-102-1 of the French Associés had resigned from its position of substitute statutory Commercial Code is provided on pages 21 and 22 of the 2003 auditor on October 27, 2003 – with effect from the date of this Annual Report. meeting – and approved the recommendation to appoint Jean- Paul Vellutini, 1 cours Valmy, F-92923 Paris La Défense Cedex, as substitute statutory auditor (14th resolution). Social and environmental information In accordance with the applicable law, PricewaterhouseCoopers Information required under paragraph 4 of article L-225-102-1 of Audit and Yves Nicolas will be granted six-year terms, expiring the French Commercial Code is provided on pages 100 and 101 at the General Meeting held to approve the 2009 financial of the 2003 Annual Report. statements. The terms of office of KPMG Audit and Jean-Paul Vellutini will correspond to the remainder of their predecessor’s terms of office and will therefore expire at the General Meeting Disclosure thresholds held to approve the 2005 financial statements. During 2003, Compagnie de Saint-Gobain did not cross any Shareholders are invited to approve the renewal of the term of disclosure thresholds in terms of ownership interest or voting office of PricewaterhouseCoopers Audit as titular statutory rights. auditor and the three new appointments.

Report of the Chairman of the Board of Directors iAmendments to the bylaws The Report of the Chairman of the Board of Directors relating to The purpose of the 15th resolution is to ensure that the bylaws the organization and presentation of the Board’s work, the comply with certain provisions of the Loi de sécurité financière internal control procedures implemented by Compagnie de of August 1, 2003.This will require amendments to paragraph 4 Saint-Gobain and any limitations on the powers of the Chief of article 7, paragraph 2 of article 12, and article 14 of the bylaws. These amendments relate to the time limit for informing the Company where disclosure thresholds are crossed – reducing it from fifteen days to five trading days –, the information neces- sary for directors to fulfill their duties, and the powers of the Chairman of the Board of Directors The resolution contains the current and amended versions of the bylaws. The 16th resolution gives full powers to carry out formalities associated with the General Meeting.

* * *

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Executive Officer is provided on pages 33 to 37 of the 2003 15 - Amendments to the Company’s bylaws to comply with Annual Report. certain provisions of the Commercial Code deriving from the Loi de sécurité financière of August 1, 2003. 16 - Powers to carry out formalities. iAgenda i I - ORDINARY MEETING Resolutions 1 - Approval of the parent company financial statements for the year ended December 31, 2003. Ordinary Meeting 2 - Approval of the consolidated financial statements for the year ended December 31, 2003. 3 - Approval of the appropriation of net income and the First resolution proposed dividend. 4 - Report on regulated agreements. Approval of the parent company financial statements for the 5 - Authorization to the Board of Directors to buy back and year ended December 31, 2003 resell the Company’s shares. The General Meeting, after reviewing the reports of the Board 6 - Renewal of the term of office as director of Jean-Louis Beffa. of Directors and the Statutory Auditors, approves the parent 7 - Renewal of the term of office as director of Isabelle Bouillot. company financial statements for the year ended December 31, 8 - Renewal of the term of office as director of Sylvia Jay. 2003 as presented, as well as the transactions reflected in the 9 - Renewal of the term of office as director of José Luis Leal financial statements and summarized in the reports. Maldonado. 10 - Appointment of Gianpaolo Caccini as director to replace Eric d’Hautefeuille. Second resolution 11 - Renewal of Pricewaterhouse Coopers Audit’s term of office Approval of the consolidated financial statements for the year as titular statutory auditor; ended December 31, 2003 12 - Appointment of KPMG Audit as titular statutory auditor. 13 - Appointment of Yves Nicolas as substitute statutory The General Meeting, after reviewing the reports of the Board auditor. of Directors and the Statutory Auditors, approves the consoli- 14 - Appointment of Jean-Paul Vellutini as substitute statutory dated financial statements for the year ended December 31, auditor. 2003 as presented, as well as the transactions reflected in the financial statements and summarized in the reports.

II - EXTRAORDINARY MEETING Third resolution Approval of the appropriation of net income and the proposed dividend The General Meeting, having noted that net income for the year amounts to €513,574,452.67 and retained earnings to €1,090,363,072.07, giving a total of €1,603,937,524.74 approves the recommendations made by the Board of Directors with respect to the appropriation of net income, and resolves: •to appropriate €290,390,704 to the special long-term capital gains reserve; •to carry forward €926,574,740.59 as retained earnings; •to appropriate for distribution to shareholders: •a first dividend of €67,299,492.20.

•an additional dividend of €319,672,587.95. •giving a total amount of €386,972,080.15. The net dividend per share carrying dividend rights will therefore amount to €1.15 which, including the 50% avoir fiscal tax credit of €0.575 (where applicable), represents total dividend income per share of €1.725. In accordance with legal requirements, dividends paid in respect of the previous three years are presented in the table below:

Year Number of Net Tax Total shares on which dividend credit *** revenue dividends paid in euros in euros in euros 2000 82,990,762* 4.30 2.15 6.45 331,963,048** 1.075 0.5375 1.6125 2001 84,080,890* 4.50 2.25 6.75 336,323,560** 1.125 0.5625 1.6875

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2002 335,523,164 1.13 fifth resolution of the Ordinary General Meeting of June 5, 0.565 1.695 2003. * Before the four-for-one stock split carried out in June 2002. The General Meeting gives full powers to the Board of Directors, and by delegation, to any person duly authorized by the Board, ** After the four-for-one stock split carried out in June 2002. to enter into any and all agreements, carry out any and all *** A 50% tax credit has been applied for the purposes of this table. formalities and take any and all other action required to give effect to this authorization. Fourth resolution Report on regulated agreements Sixth resolution The General Meeting notes the terms of the Statutory Auditors’ Renewal of the term of office as director of Jean-Louis Beffa special report on regulated agreements, drawn up in accor- After reviewing the report of the Board of Directors explaining dance with legal requirements, which records no regulated that Jean-Louis Beffa’s term of office expires at the close of this agreements entered into in 2003. meeting, the General Meeting renews his term of office for a period of four years, expiring at the close of the General Fifth resolution Meeting called to approve the financial statements for the year ending December 31, 2007. Authorization to the Board of Directors to buy back and resell the Company’s shares Seventh resolution The General Meeting, having reviewed the report of the Board of Directors and the prospectus approved by the Autorité des Renewal of the term of office as director of Isabelle Bouillot Marchés Financiers, authorizes the Board of Directors to buy After reviewing the report of the Board of Directors explaining back and possibly resell Company shares, in accordance with that Isabelle Bouillot’s term of office expires at the close of this articles L.225-209 et seq. of the Commercial Code, on one or meeting, the General Meeting renews her term of office for a more occasions. The shares may be purchased, sold or trans- period of four years, expiring at the close of the General ferred by any appropriate method, including over-the-counter, Meeting called to approve the financial statements for the year in the form of block sales, through option transactions or by ending December 31, 2007. means of derivative instruments. The purpose of this authori- zation is to allow the Company to grant and give effect to the exercise of stock purchase options, allocate shares to Eighth resolution employees, buy and sell the Company’s shares (including while a public tender offer is in progress) to take advantage of market Renewal of the term of office as director of Sylvia Jay situations, to stabilize the share price by trading against the After reviewing the report of the Board of Directors explaining trend, to cancel the shares subject to authorization by an Extra- that Sylvia Jay’s term of office expires at the close of this ordinary Meeting, to hold the shares in treasury stock or to sell meeting, the General Meeting renews her term of office for a or transfer them on or off a stock exchange, including in period of four years, expiring at the close of the General exchange for shares, or to manage the Company’s cash position Meeting called to approve the financial statements for the year or equity. Such transactions will be governed by the following ending December 31, 2007. terms: •maximum purchase price: €55 per share •minimum sale price: €23 per share Ninth resolution •maximum number of shares: 10% of the total number of shares making up the Company’s capital stock. In view of the Renewal of the term of office as director of José Luis Leal treasury shares held by the Company, the maximum theoret- Maldonado ical purchase price for share buy backs would be €1,626,733,350, After reviewing the report of the Board of Directors explaining corresponding to 29,576,970 shares acquired at a price of €55 that José Luis Leal Maldonado’s term of office expires at the each. close of this meeting, the General Meeting renews his term of In the case of a bonus share issue paid up by capitalizing office for a period of four years, expiring at the close of the reserves, or a stock split or reverse stock split, the above prices General Meeting called to approve the financial statements for per share will be adjusted based on the ratio between the the year ending December 31, 2007. number of shares issued and outstanding before and after the transaction. This authorization is granted for a period of eighteen months Tenth resolution from the date of this meeting. It supersedes, for the unexpired Appointment of Gianpaolo Caccini as director to replace Eric period, the unused portion of the authorization granted in the d’Hautefeuille

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After reviewing the report of the Board of Directors, the General Having reviewed the report of the Board of Directors which Meeting elects Gianpaolo Caccini as a director to replace Eric noted the resignation of Pierre-Henri Scacchi & Associés from d’Hautefeuille who has passed away. its position as Substitute Statutory Auditor on October 27, 2003 His term of office will correspond to the remainder of Mr – effective from the date of this meeting – the General Meeting d’Hautefeuille's term, expiring at the close of the General appoints Jean-Paul Vellutini, 1 cours Valmy, F-92923 Paris La Meeting held to approve the financial statements for the year Défense Cedex, as Substitute Statutory Auditor for the ending December 31, 2004. remainder of his predecessor’s term of office, which expires at the General Meeting held to approve the financial statements for the year ending December 31, 2005. Eleventh resolution Renewal of PricewaterhouseCoopers Audit’s term of office as Titular Statutory Auditor of Compagnie de Saint-Gobain Extraordinary Meeting Having reviewed the report of the Board of Directors explaining that the term of office as Titular Statutory Auditor, granted to Fifteenth resolution PricewaterhouseCoopers Audit at the June 25, 1998 Ordinary and Extraordinary General Meeting, expires at the close of this Amendments to the Company’s bylaws to comply with certain meeting, the General Meeting renews said term of office for provisions of the Commercial Code deriving from the Loi de PricewaterhouseCoopers Audit, 32 rue Guersant, F-75017 Paris, sécurité financière of August rights or any multiple thereof, as Titular Statutory Auditor for a six-year term, expiring at the 1, 2003 the said shareholder must General Meeting held to approve the financial statements for Having reviewed the report of inform the Company of their the year ending December 31, 2009. the Board of Directors, the total number of shares or Extraordinary General voting rights held upon the crossing of each disclosure Twelfth resolution Meeting resolves to amend paragraph 4 1°/ of article 7, threshold. Said disclosure Appointment of KPMG Audit, Department of KPMG S.A., as paragraph 2 of article 12, and must be made by registered Titular Statutory Auditor of Compagnie de Saint-Gobain article 14 of the bylaws as letter with return receipt follows: requested within fifteen days Having reviewed the report of the Board of Directors which of the date when the noted the resignation of S.E.C.E.F from its position as Titular •The first amendment relates to the time limit for threshold is crossed.The same Statutory Auditor on November 3, 2003 – effective from the obligation applies when a date of this meeting –, the General Meeting appoints as Titular informing the Company where disclosure thresholds shareholder crosses the said Statutory Auditor KPMG Audit, Department of KPMG S.A., 1 disclosure thresholds by cours Valmy, F-92923 Paris La Défense Cedex, for the remainder set down in the bylaws are crossed. reducing their direct or indi- of its predecessor’s term of office, which expires at the General rect interest in the Company’s Meeting held to approve the financial statements for the year capital or voting rights. ending December 31, 2005. (Amendments in italics). Current wording New wording ARTICLE 7 Thirteenth resolution ARTICLE 7 FORM OF SHARES FORM OF SHARES Appointment of Yves Nicolas as substitute auditor of Compagnie de Saint-Gobain Paragraph 4 Paragraph 4 After reading the report of the Board of Directors explaining 1°/ Where a shareholder, 1°/ Where a shareholder, that the term of office as substitute auditor, granted to Daniel acting alone or in concert, acting alone or in concert, Chauveau at the June 25, 1998 Ordinary and Extraordinary increases the amount of their increases the amount of their General Meeting, expires at the close of this meeting, the direct or indirect holding (as direct or indirect holding (as General Meeting appoints Yves Nicolas, 32 rue Guersant, F-75017 defined in L.223-9 and L.233-10 defined in L.223-9 and L.233-10 Paris, as substitute auditor for a six-year term, expiring at the of the Commercial Code) such of the Commercial Code) such General Meeting held to approve the financial statements for that the shares held represent that the shares held represent the year ended December 31, 2009. at least 0.5% of the at least 0.5% of the Company’s capital or voting Company’s capital or voting Fourteenth resolution Appointment of Jean-Paul Vellutini as Substitute Statutory Auditor of Compagnie de Saint-Gobain

190 SAINT-GOBAIN • GENERAL MEETING SAINT-GOBAIN RA 2003 Soc GB 19/05/04 7:49 Page 191

rights or any multiple thereof, the said shareholder must ings. He shall oversee the proper operation of the Company’s inform the Company of their total number of shares or voting management bodies and ensure that the directors are in a rights held upon the crossing of each disclosure threshold. Said position to fulfill their duties.When the Chairman of the Board disclosure must be made by registered letter with return is not also the Company’s Chief Executive Officer, he will be required to retire from office at the latest at the close of the General Meeting held to approve the accounts of the year in receipt requested within five which he reaches his sixty-eighth birthday. trading days of the date when (Amendments in italics). the threshold is crossed. The Current wording same obligation applies Sixteenth resolution when a shareholder crosses ARTICLE 12 the said disclosure thresholds POWERS OF THE BOARD OF Powers to carry out formalities by reducing their direct or DIRECTORS The Extraordinary General Meeting gives full powers to the indirect interest in the bearer of an original, copy or extract of the minutes of this Paragraph 2 Company’s capital or voting meeting, to carry out all necessary formalities. rights. Directors shall receive all •The second amendment information required for concerns information them to fulfill their duties provided to directors. and may request any docu-

ments which they may think fit. New wording

ARTICLE 12

POWERS OF THE BOARD OF ings. He shall oversee the DIRECTORS proper operation of the Company’s management Paragraph 2 bodies and ensure that the The Chairman or the Chief directors are in a position to Executive Officer of the fulfill their duties. When the Company shall provide direc- Chairman of the Board is not tors with all of the documents also the Company’s Chief and information required for Executive Officer, he will be them to fulfill their duties. required to retire from office - The third amendment at the latest at the close of concerns the powers of the the General Meeting held to Chairman of the Board of approve the accounts of the Directors. year in which he reaches his sixty-eighth birthday. (Amendments in italics). New wording Current wording ARTICLE 14 ARTICLE 14 CHAIRMAN OF THE BOARD CHAIRMAN OF THE BOARD OF DIRECTORS OF DIRECTORS The Chairman of the Board of The Chairman of the Board of Directors shall organize and Directors shall represent the manage the work of the Board. He shall organize and Board and report thereon to manage the work of the General Shareholders’ Meet- Board and report thereon to General Shareholders’ Meet-

SAINT-GOBAIN • GENERAL MEETING 191 SAINT-GOBAIN RA 2003 Soc GB 19/05/04 7:49 Page 192

Statutory Auditors’ special report on regulated agreements

For the year ended December 31, 2003

To the shareholders,

In our capacity as Statutory Auditors of Compagnie de Saint- We have not been advised of any new agreements governed by Gobain, we are required to report on regulated agreements of article L. 225-38 of the Commercial Code. which we have been advised. Our responsibility does not include identifying and undisclosed agreements. Paris, March 25, 2004

The Statutory Auditors

PricewaterhouseCoopers Audit SECEF

Pierre Coll Christian Marcellin Jacques Tenette Francis Vallet

192 SAINT-GOBAIN • GENERAL MEETING 3eme DE COUVERTURE-GB 18/05/04 9:08 Page IIII

Main addresses

France United Kingdom Commonwealth of China Head Office and Republic Independent States (CIS) Delegation and divisions: Flat Glass, of Ireland Delegation Citic Building 24-5 Insulation, Reinforcements, General Delegation Volokolamskoye, Shosse, 1 19 Jian Gao Men Wai Da Jie Containers, Aldwych House "Proektny Institut # 2" 100004 Beijing Ceramics & Plastics, 81 Aldwych 125843 Moscow, Russia Tel.: (86-10) 65 01 33 27 Abrasives, UK-London WC2B 4HQ Tel.: 7 (095) 937 32 23 Fax: (86-10) 65 12 98 43 Building Materials Tel.: (44) (0)20 7400 8800 Fax: 7 (095) 937 32 24 www.saint-gobain.com.cn Distribution, Fax: (44) (0)20 7400 8899 www.saint-gobain.ru Building Materials www.saint-gobain.co.uk Asia-Pacific General Delegation Les Miroirs Eurasia Saint-Gobain Bldg 18, Avenue d'Alsace Delegation Spain, Portugal 3-7 Kojimachi, Chiyodaku F-92400 Courbevoie Büyükdere Caddesi and Morocco Bahçeler Sok. Efe Han N° 20/1 102-0083 Tokyo www.saint-gobain.com General Delegation Mecidiyeköy, Istanbul,Turkey Tel.: (813) 52 75 08 61 Edificio Ederra - Centro Azca Tel.: (90) 212 275 67 76 Fax: (813) 52 75 08 69 Mailing Address: Paseo de la Castellana n° 77 Fax: (90) 212 275 67 34 www.saint-gobain.co.jp Les Miroirs E-28046 Madrid www.saint-gobain.com.tr F-92096 La Défense Cedex Tel.: (34) (91) 397 20 00 Tel.: +33 (0)1 47 62 30 00 Fax: (34) (91) 397 26 26 South-East Asia United States and Delegation Pipe Division Canada 15 Beach Road 91, avenue de la Libération Italy and Greece General Delegation # 04-02 Beach Centre F-54076 Nancy General Delegation 750 E Swedesford Road Singapore 189677 Tel.: +33 (0)3 83 95 20 00 Via E. Romagnoli, 6 PO Box 860 Tel.: (65) 63 34 26 36 Fax: +33 (0)3 83 96 27 57 I-20146 Milan Valley Forge, PA 19482-0101 Fax: (65) 63 34 53 25 www.pont-a-mousson.com Tel.: (39) (2) 42 43 1 Tel.: (1) (610) 341 70 00 Fax: (39) (2) 47 47 98 Fax: (1) (610) 341 71 01 India www.saint-gobain.com/us General Delegation Germany Nordic Countries Army and Navy Building Brazil and Argentina 148 Mahatma Gandhi Road and Central and Baltic States 400001 Mumbai General Delegation General Delegation and Eastern Europe Tel.: (91-22) 2284 4727 Box 501 Avenida Santa Marina, 482 General Delegation Fax: (91-22) 2282 2617 S-26050 Billesholm Agua Branca Viktoria-Allee 3-5 www.saint-gobain.co.in D-52066 Aachen Tel.: (46) 42 840 00 05036-903 São Paulo SP Tel.: (49) (241) 516 0 Fax: (46) 42 840 01 Tel.: (55) (11) 3874 7988 Fax: (49) (241) 516 24 44 Fax: (55) (11) 3611 1598 www.saint-gobain.com.br www.saint-gobain.de Poland, Ukraine and Moldavia Mexico, Colombia and Benelux General Delegation General Delegation Atrium Plaza Venezuela Boulevard de la Plaine, 5 Al Jana Pawla II 29 General Delegation B-1050 Brussels 00-867 Warsaw, Poland Horacio n°1855-502 Tel.: (32) (2) 645 87 11 Tel.: (48) 22 653 79 00 Colonia Polanco Fax: (32) (2) 645 87 95 Fax: (48) 22 653 79 09 11510 Mexico DF Tel.: 52 (55) 52 79 16 00 Fax: 52 (55) 52 79 16 99 www.saint-gobain.com.mx ST GOBAIN - COUVERTURE-GB 14/05/04 9:36 Page 1

ANNUAL REPORT Designed and produced by:Designed and produced credits: Photo – library, photo Saint-Gobain Deluze, Rémy X 2003 ANNUAL REPORT REPORT ANNUAL 2003 -GOBAIN T IN SA

Les Miroirs F-92096 La Défense Cedex www.saint-gobain.com